November Jobs Report Jewel in the Economic-Data Crown

Call it whiplash: Global markets zigzagged back and forth through the trading week thanks to a range of commentary from central banks in Europe and the U.S., alongside a mixed bag of economic data that was topped with a gleaming November jobs report.

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In the end, U.S. equity markets capped the week mostly flat.

Here are all the biggest moves you might have missed this week on Wall Street.

Central Bank Policies

Ahead of a Thursday a policy announcement from the European Central Bank, investors widely expected ECB President Mario Draghi to expand monetary policy actions to help combat slow growth in the eurozone.

The central bank slashed its deposit rate by 10 basis points to -0.30% in an effort to encourage consumers to begin spending more of their money instead of stashing it away at the bank. Meanwhile, the bank held its benchmark refinancing rate steady at 0.05%, while also extending its asset-purchase program through March 2017 or beyond if it becomes necessary.

While the ECB acted in a similar fashion to what the markets had anticipated, it wasn’t dovish enough to satisfy expectations, and therefore sent global markets plunging.

“Everyone was expecting Draghi to be the white knight for Europe once again, and he hasn’t really showed up,” he said. “Today’s measures amount to tinkering around the edges. They may help the European economy a bit, particularly signaling that excess liquidity and therefore accommodative monetary policy for even longer,” Patrick O’Donnell, Aberdeen Asset Management investment manager said.

The major averages in the U.S. closed the session down more than 1%, while major averages in Europe, including the Euro Stoxx 50 and the German Dax, ended down more than 3%.

However, the losses didn’t hold. On Friday, global markets bounced back, and the benchmark indexes in the U.S. erased losses in the prior session to cap the week slightly higher.

November Jobs Report Shines

The Labor Market delivered, on Friday, the last piece of the rate-hike puzzle. The November jobs report showed the U.S. economy added 211,000 jobs during the month, better than the 200,000 jobs Wall Street expected. Meanwhile, the unemployment rate held steady at 5%, also as expected, and the labor force participation rate ticked up to 62.5% from 62.4%, while Wall Street expected it to hold steady.

Wall Street surged on the news as the data were seen as just good enough to give the Federal Reserve confidence to go ahead and raise rates at its FOMC meeting in two weeks.

“It’s a relief to kind of have that out of the way, and remove some of the uncertainty. It was a very positive thing for the markets today,” Bryce Doty, senior portfolio manager at Sit Fixed Income said.

While the jobs report itself wasn’t considered “weak,” other data out this week that the data-dependent Fed has said it is keeping a close eye on, hasn’t fared as well. Recall, ISM’s gauge of manufacturing activity slipped into contraction for the first time since 2012, and registered the lowest level since 2009. The service sector didn’t fare much better, recording an unexpected dip last month.

Still, Doty said it’s important to look at the overall economic picture and keep in mind manufacturing, while in contraction, only make sure 15% of the overall U.S. economy.

“If the economy was really weakening, you would see both sectors go down. But I think the manufacturing sector is being affected by an appreciation of the dollar, but also the energy sector is suffering because of lower oil prices. But when energy producers suffer, energy users benefit, so you’re seeing services do better as a result,” Doty added.

OPEC Sends Oil Prices Diving

The Organization for Petroleum Exporting Countries, or OPEC, announced Friday that it would keep production rates steady. The move had been widely anticipated by the markets, but still sent global crude oil prices plunging. Investors have been grappling with multi-year low prices that have more than halved from last summer.

In the past OPEC has declined to reduce its output, a move that would help bring prices higher and begin to ease the global supply glut that’s weighing on the market. The decision has been fueled by a desire to help put newer, high-cost producers like U.S. shale players out of business, and effectively allow OPEC to maintain its reign over the oil market.

Despite the determination to keep prices low in an effort to reduce competition from non-OPEC producers, there’s increasingly a divide within the cartel as cash-strapped nations like Venezuela disagree with Saudi Arabia, and hope to ease the pressure on the market. Saudi Arabia has floated the idea of reducing output, but with strict conditions including rivals Iraq and Iran also slimming production.

West Texas Intermediate crude prices settled down more than 4% on Friday, the fifth-lowest settle price of the year, and below the psychologically significant $40 a barrel level. Prices ended at $39.97, while Brent, the international benchmark, dropped 4.15% to $43.00 a barrel.

Week Ahead

Next week brings a relatively light economic calendar, with only a few key reports due. Here’s what to watch.

  • Monday: Consumer credit
  • Tuesday: NFIB
  • Wednesday: Wholesale trade
  • Thursday: Weekly jobless claims, import/export prices
  • Friday: Retail sales, consumer sentiment, producer prices