Europe
The FTSE 100 had a strong start to the session as the pound was still suffering from the Bank of England (BoE) update yesterday. But a combination of a robust rise in the growth rate of the UK services sector and the mediocre US non-farm payrolls figure pushed the pound higher, and we saw the FTSE 100 turnover on itself. The FTSE 100 is comfortably above the 7500 mark and the upward trend it has been in since mid-September is still intact, so the wider bullish move could continue.
Lonmin (LON:LMI) stated it won’t be releasing its full-year figures until it has completed its operational review. The company is going through a restructuring programme and doesn’t want to reveal its financial health until it has everything in place. The mining company has already been given breathing space by a couple of its banks, and it doesn’t want to run the risk of breaching its covenants. Investors have lost some confidence in the company as they have already shown their hand to be weak.
The IBEX 35 is the biggest faller in Europe after Spanish government has seemed to come down hard on some Catalan nationalist politicians. Dealers are jittery that an excessively strong-handed response from the Madrid administration could stoke tensions in the country. UBS cut its price target for Caixabank (LON:0ILK) and Bankia (LON:0RQ1) – this is compounding the problem.
US
The Dow Jones and S&P 500 are largely unchanged after a lacklustre non-farm payrolls report. US equites have been flying high recently, and the underwhelming jobs report encouraged a bit of profit taking.
In October, the US added 261,000 jobs, while the market was expecting 310,000 jobs to have been added. The September figure was revised from a decline of 33,000 to an increase of 18,000. The unemployment rate dipped to 4.1% from 4.2%.
The earnings growth numbers were disappointing. On a month-on-month basis the growth rate was 0.0%, down from 0.5% and on a year-on-year basis it was 2.4%, down from 2.8%
The markets are pricing in a high probability of an interest rate hike in December, and now the focus will be on what the Federal Reserve might do in 2018. Overall, today reports wasn’t too impressive so the outlook for next year isn’t too clear.
The ISM non-manufacturing report made up for the tepid jobs report .and the reading came in at 60.1, while the markets was anticipating 58.5, and the previous reading was 59.8.
Shares in Apple (NASDAQ:AAPL) gapped higher and hit a record high after the tech giant posted a very strong set of results after the closing bell last night. Earnings per share (EPS) came in at $2.07, easily ahead of the $1.87 expected. Revenue was $52.6 billion and traders were expecting $50.7 billion. The revenue guidance for the first-quarter was upped to. The company has been losing market share in China, but in the latest quarter it produced a 12% jump in revenue.
FX
GBP/USD was helped along by the UK services PMI report which was 55.6, while dealers were expecting a reading of 53.3. The services sector accounts for over 70% of British output so this was a big boost to the pound. Sterling started to slide after the US ISM report, but it is still higher on the day.
EUR/USD is also suffering at the hands of the rally in the greenback. There were no major economic announcements from the eurozone today, so the single currency is at the mercy of the US dollar. The latest European Central Bank (ECB) update left the door open to additional easing and this is playing on dealer’s minds.
Commodities
Gold has had a rocky ride today as the disappointing US jobs report nudged it higher, and then the strong US ISM non-manufacturing figure dragged it lower. The metal is very sensitive to the changes in the perception of how dovish or hawkish the US central bank is, and at the moment traders are edging toward the latter.
WTI and Brent Crude have been hit by profit taking again after the oil market hit multi-year highs on Wednesday. Given the relatively small move lower in the energy market, it could be viewed as a pullback after a strong rally. If traders genuinely felt demand was weak or over-supply was a problem, the move to the downside was be larger.
At 5pm (UK time) the US will announce the Baker Hughes active rig count, and keep in mind last week’s figure was 737.
Disclaimer: CMC Markets is an execution-only service provider. The material (whether or not it states any opinions) is for general information purposes only, and does not take into account your personal circumstances or objectives. Nothing in this material is (or should be considered to be) financial, investment or other advice on which reliance should be placed. No opinion given in the material constitutes a recommendation by CMC Markets or the author that any particular investment, security, transaction or investment strategy is suitable for any specific person.