US Jobs Report Eyed as Weaker JOLTS Data Signal Slack Appearing in Labour Market

Equity markets are treading water in the middle of the week as investors weigh up what is next for the Fed following the surprise decline in JOLTS job openings, how much further the RBNZ will go in light of today’s decision and what the OPEC+ cut means for oil prices and inflation.

There’s been a lot to take on board over the last few days and it’s been a real mix of good and bad news. The JOLTS data yesterday could be the first signs of weakness in the US labour market and that is huge. Without it, the Fed will find it very hard to make the argument that it is pausing the tightening cycle. Now it needs to be backed up and the jobs report on Friday could start that process.

RBNZ not done with tightening despite huge rate hikes over the last year

The RBNZ is clearly not of the view that it is close to being able to pause its tightening cycle, despite having raised rates extremely aggressively over the last year or so. The central bank surprised markets by raising the OCR by 50 basis points and there’s likely to be more to come. As we’re seeing elsewhere, New Zealand has its own issues with inflation, most notably an extremely tight labour market. There may be some economic pain ahead as the central bank tries to get to grips with that.

Oil holds gains after OPEC+ cut but remains around recent highs

Oil prices are consolidating after the early week surge in the aftermath of the OPEC+ announcement. The decision to cut output has proven to be very controversial, much like the two million barrel reduction in October, but just like that, there’s no guarantee it will lead to dramatically higher prices.

In fact, at this stage crude is only trading around the highs of the last four months and it’s tested these levels on a number of occasions. A break above here could be a bullish signal but at this point, we are still seeing plenty of resistance. Recent stress in the banking system has led to weaker economic expectations and lower interest rate forecasts and the cut could simply be a response to that.

At this point, the only thing that’s clear is that OPEC+ has no appetite for Brent prices below $80 a barrel. That could make any future foray below there challenging as the group has now shown not only will it cut production, it will do so without warning. That is clearly the message they wanted to send.

Gold edging ever closer to record highs

Gold smashed through $2,000 on Tuesday as the latest JOLTS data showed openings declining and significantly so, in one of the first signs of the labour market cooling. It’s still very early days but the data will be a little encouraging for the Fed, especially if paired with a softer jobs report on Friday.

We’ve heard a number of announcements of mass layoffs in tech and banking in recent months but that hasn’t yet been reflected in the data and it could be that we now start to see slack appearing. It comes at a good time as the Fed could do with a reason to pause the tightening cycle and the response we saw in yields and gold yesterday suggests investors believe it may now get that.

For gold, it’s only traded at this level on two days ever so that doesn’t leave much guidance in terms of technical levels, beyond the all-time highs around $2,070. A weaker jobs report on Friday could see that tested, especially in what will likely be extremely thin trade given the bank holiday.

What will be the next bullish catalyst for bitcoin?

We’re continuing to see choppy trade in bitcoin but importantly, pullbacks have been small and brief which may reassure the crypto crowd that there’s more to come. It’s just hard to know at this point whether the rebound is sustainable, what the next bullish catalyst will be, or even how it will respond to Friday’s jobs report if it is at the weaker end of the spectrum. Whatever happens, it promises to be a fascinating one to follow.