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Strong ADP Job Data Raise Hopes for Upside Surprise on Nonfarm Payrolls Print E-mail
ONG Focus | Insights | Written by Oil N' Gold | Fri Jan 05 18 01:13 ET

Wall Street rallied further with DJIA surpassing 25 000 for the first time on record. Strong ADP job report intensified hopes of a better-than-expected nonfarm payrolls report due today. However, US dollar's rebound proved short-lived. In the commodity sector, crude oil extended recent strength with the WTI contract settling above 62 for the first time in 3 years. The front-month Brent contract also added +0.34% and ended the day at 68.07. For fuels, while RBOB gasoline price managed to hang onto gains, heating oil dropped as the EIA report showed a huge stock-build a week ago. Precious metals remained firmed with the benchmark Comex gold and silver contract climbing higher, by +0.24% and +0.02% respectively.

The US Energy Information Administration (EIA) shows that total crude oil and petroleum products stocks increased +1.17 mmb to 1225.27 mmb in the week ended December 29. Crude oil inventory plunged -7.42 mmb to 424.46 mmb as stock declined in 4 out of 5 PADDs. PADD 2 and 3 inventories fell -3.48 and -2.07 mmb for the week, respectively. Cushing stock dropped -2.44 mmb to 48.97 mmb. Utilization rate added +1% to 96.7%. Meanwhile, crude production resumed gains, by +0.29M bpd to 9.78M bpd for the week. For refined oil products, gasoline inventory soared +4.81 mmb to 233.19 mmb as demand declined -8.8% to 8.65M bpd. Production fell -5.51% to 9.68M bpd while imports plunged -10.05% to 0.35M bpd during the week. Distillate inventory jumped +8.9mmb to 138.83 mmb as demand tumbled -17.06% to 3.59M bpd. Production gained +2.12% to 5.59M bpd while imports fell -46.03% to 0.13M bpd during the week.

On the dataflow, the ADP estimated that US employment rose +250K in December, beating consensus of a +190K increase and the downwardly revised +185K. Separately, Challenger showed a -3.6% decline in the number of jobs in December, following a +30.1% gain in the prior month. The final estimate of US services PMI was revised higher, by -1.3 points, to 53.7 in December. However, this remained below November's 54.5. According to Markit, the final services PMI, together with the manufacturing PMI, signaled "a moderation in the pace of expansion to the weakest since June". Yet, it added that "the overall rate of expansion remains relatively robust, with the PMIs running at levels consistent with the economy growing at a solid 2-2.5% annualized rate" in 4Q17. On the job market, Markit suggested that the hiring trend "continued to run at a pace indicative of nonfarm payrolls up by around +195K in December". On a separate note, initial jobless claims increased to 250K in the week ended December 30, compared with consensus of 244K and last week's 245K.

Today's focus in undoubtedly on the US employment report for December. Nonfarm payrolls probably increased +189K, down from 228K in November. The unemployment rate probably stayed unchanged at 4.1% or the month. Average hourly earnings might have grown +0.3% m/m in December, from +0.2% in the prior month. The ISM non-manufacturing index probably edged +0.2 point higher to 57.6 in December. In the Eurozone, headline CPI probably eased to +1.4% y/y in December, from +1.5% a month ago. Core CPI might have improved to +1% y/y, from November's+0.9%. Meanwhile, Germany's retail sales probably expanded +1% m/m in November, after contracting -1.2% a month ago.


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