Jobs numbers round off a week of falling oil and big banks

It’s been a bumpy ride this week, as oil prices fell, bounced, and then continued to fall after OPEC declined to limit their production and American oil reserves surged, creating both winners and losers.

This week also saw unchanged interest rates in Canada, big days on the stock market in the U.S., speculation about stimulus in the eurozone and major fallout for the Russian economy. And this morning brought more news – an increase in the unemployment rate in Canada and a boost in jobs to the south.

The day ahead

Jobs numbers are out for Canada and the U.S. Markets in both countries will be anticipating labour numbers for November today as a sign of where the economy is headed in the tail end of the year. The U.S. is expected to have increased job growth from October, adding 230,000 jobs to the payroll, while a gain in Canadian jobs could mean the third straight month of increases.

Update: After a back-to-back streak of job gains for September and October, last month saw a slight downturn, as 10,700 jobs were lost and the unemployment rate edged higher a percentage point higher – from the lowest rate since 2008 – to 6.6 per cent. But the past six months have seen a lot of monthly job growth.

In the U.S., the numbers were rosy, as signs of a healthier economy begin to multiply: November added 321,000 jobs to the economy, an uptick in hourly wages, and an unemployment rate unchanged at 5.8 per cent – down from seven per cent this time last year.

Oil was down again yesterday, with OPEC giving discounts for customers in Asia and the U.S. The decision was seen as a bid to maintain market share, as shale gas boosts American oil reserves to their highest since the mid-1970s. This morning, Brent crude was just over US$69 while West Texas Intermediate was just above US$66.

TSX took a dive on flagging commodities and new banking numbers from CIBC and TD, and was down a per cent throughout the day. But the drop was especially deep in the last hour of trading, and the culprit, according to BMO, was Goldman Sachs, who sold a large number of Canadian energy and banking stocks late in the day. The drop was one of the year’s biggest for the TSX.
Hoping for good news from the U.S. jobs numbers, European markets are rallying this morning, while China spent the day on a wild ride of its own (see below!)

The loonie followed suit, dropping on oil and commodity prices to close at just above 87 cents.

Last day of banks season! Yesterday saw some mixed numbers, as TD and CIBC both reported their quarterly earnings. TD earnings fell short of estimates, even with a 19 per cent jump in profits in 2014 from 2013, up to $7.9 billion – though profits in 2013 had been dampened by big one-time expenses. CIBC slipped by 1.7 per cent from the previous year, with net income of $811 million, but, like BMO, raised its dividend.

Even as profits continue for the country’s big banks, the Globe noted a trend toward spiking cost at several banks, including CIBC and TD, that could undermine revenues. Scotiabank will report their fourth-quarter earnings today.

 

What you missed

No change in European Central Bank rate – as expected. While there were hints of major stimulus to come, there were no clear signs from ECB president Mario Draghi on whether the Bank will employ quantitative easing, though speculation is still rampant that it could happen early next year. The ECB also downgraded their forecast for eurozone growth this year and next from what they had predicted just three months ago. For 2014, they said the economy would be down to 0.8 per cent for 2014 (from the initial prediction of 0.9 per cent), and for 2015, expected growth was at one per cent, down from the earlier prediction of 1.6 per cent. This morning, the eurozone’s statistics office confirmed growth in the third quarter was only 0.2 per cent, but European markets are looking for optimism anyways, on hints of ECB stimulus and the release of U.S. jobs numbers later today.

The Chinese markets went into overdrive today as turnover on the Shanghai composite reached over US$103 billion. It was a wild ride, and the FT noted there few obvious explanations as to why the surge was so extreme. They pointed not to big foreign investors as the explanation, but to a huge bump in retail investors, with Morgan Stanley saying new accounts are opening at an extraordinary rate.

Russia’s central bank has been pouring money into the ruble, after oil prices sent the currency down to rates not seen since the 1998 Russian financial crisis. Bloomberg reported the Bank announced today that it sold $1.9 billion worth of foreign currency two days ago. The ruble is rallying again today on speculation that central bank stimulus has continued. Earlier this week, the Kremlin acknowledged the country is facing a recession in 2015.