Market Insider

Europe, US Jobs-Related News Dominate 

U.S. jobs-related data may pique investor interest Wednesday, as markets remain focused on developments in Europe.

Friday's government employment report is the big data item for the week, but Wednesday's ADP payrolls data and Challenger job cuts report are the monthly warm up act. ADP is expected to show that 130,000 jobs were created in November. Economists expect to see improvement in the government report Friday, with non farm payrolls, at 125,000, up from October's 80,000.

"This is probably a better jobs reporting week than we've had in the past," said Art Hogan of Lazard Capital Markets. "The weekly jobless claims have been under 400,000 for a couple weeks, so the jobs number we get on Friday is probably going to have an upside surprise to it."

Better U.S. data has been a pattern over the past several weeks, and has been occasionally encouraging to traders who have been more often obsessing about the negative swirl around the euro zone's sovereign debt crisis. The strong start to the holiday shopping season has helped sentiment this week.

Consumer confidence was a positive for Tuesday's markets, jumping to a surprise 56 in November, from 40.9 in October. The labor market indications in the report also improved, with consumers reporting jobs as "hard to get," declining to 42.1 percent, the lowest level since January, 2009.

Another positive Tuesday was the movement by Congressional Republicans to back extending the payroll tax cut, which was set to expire Dec. 31. Economists say the tax cuts could account for as much as 1 percent of GDP growth for 2012. There was concern the tax cuts would be left to expire after the failure last week of the Congressional super committee to find required deficit reductions.

The Dow finished Tuesday slightly higher, up 32 at 11,555, but the S&P 500 was up just 2 at 1195, below the psychologically important 1200 level. The Nasdaq was negative, down 11 at 2515. U.S. stock futures were weaker Tuesday evening. Standard and Poor's downgraded and lowered the outlook on a long list of banks, sending bank stocks lower in after hours trading.

Wednesday's data includes the Challenger report, at 7:30 a.m. EST; ADP at 8:15 a.m., and productivity and costs at 8:30 a.m. Chicago PMI is released at 9:45 a.m. and pending home sales are reported at 10 a.m. The Fed's beige book is released at 2 p.m. There are also several key earnings reports including American Eagle and Sea Drill before the bell, and Aeropostale and Express after the closing bell.

Markets Wednesday will also dissect the latest news from Europe and will continue to follow the European finance ministers meetings.

Late Tuesday, the ministers agreed on measures to give their European Financial Stability Fund bailout fund more fire power, but according to reports the fund might raise between 500 and 750 billion euros, short of the trillion plus markets had been looking for.

"There's a lot of unanswered questions," said Brown Brothers Harriman head currency strategist Marc Chandler. The agreed plan would insure the first 20 to 30 percent of new bond issues for countries with funding problems and create co-investment funds to draw foreign investors into euro zone government bonds. Chandler said the euro may firm up after its steep sell off and ahead of the more important meetings of European leaders next week.

"People are waiting not so much for this week's development but more for the summit December 8 and 9 because that's where the next big step is coming from," Chandler said.

European finance ministers also said they would appeal to the IMF to become more involved in the bailout efforts. The ministers also approved a new $10.7 billion loan installment for Greece so it can keep paying its bills.

Oil Drill

NYMEX oil prices closed in on $100 and Brent rose even more, as investors reacted to news that Iranian students had stormed the British embassy, breaking windows and throwing petrol bombs. Iran retaliated against British financial sanctions by expelling its Ambassador. 

Analysts say oil has been reacting more to headlines from Europe and not so much to global events. On Tuesday, that changed with West Texas Intermediate rising to $99.79, up 1.6 percent, and Brent, which more reflects international markets, was up 1.7 percent at $110.82 per barrel. Some analysts see the premium from geopolitical risk at about $10 per barrel, but some say the market is not even close to pricing in a serious escalation of tensions with Iran.

"The premium is probably even more than $10," said John Kilduff of Again Capital. Kilduff said the concern about Iran is not the loss of the 4 percent of global oil that it produces but the loss of the sea channels through the Straits of Hormuz, were Iran to retaliate against sanctions being brought by Western governments.

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