Europe
European equity markets were edging lower in the first-half of the trading session but when the New York Stock Exchange opened they were dragged higher by their American counterparts. It terms of macro events it has been fairly quiet, and the solid non-farm payrolls figure on Friday is propping up sentiment.
BAE Systems (LON:BAES) up 1.5% after the High Court rejected the bid to stop the UK selling arms to Saudi Arabia. The company derives roughly 16% of its revenue from the Arab state, and it would have been a major blow to the defence company had the High Court ruling gone the other way.
Schroders (LON:SDR) is in positive territory after RBC Capital Markets upgraded the stock from ‘sector perform’ to ‘outperform’, and the target price was raised from 3300p to 3400p. The Canadian bank believes Schroders is undervalued relative to the sector.
US
The Dow Jones and the S&P 500 are broadly unchanged on the trading session and investors are still satisfied with Friday’s jobs report. The US economy needs to keep creating approximately 200,000 jobs each month order to keep the recovery moving along. The adding of 222,000 jobs in June was welcomed. Especially when you consider that ADP report came in at 158,000, and the market was expecting 185,000. The Federal Reserve are more focused on economic growth than inflation these days, and it would appear that investors are more than happy with the latest jobs report, even though unemployment and wage growth missed expectations.
FX
The US dollar is still in favour with traders as the robust headline non-farm payroll figure is still giving the currency the edge over others. The greenback is still reaping the rewards of Friday’s jobs report even though it wasn’t all amazing. The June figure of 222,000 was impressive, and the upward revision of the May number was encouraging to see. The ticking up of the unemployment rate and the revision lower of the May’s average earnings hasn’t seemed to put off the dollar bulls.
The GBP/USD will be in focus tomorrow as Andy Haldane and Ben Broadbent, of the Bank of England, will be speaking tomorrow. Mr Haldane has expressed hawkish views in the past couple of weeks, and dealer don’t seeing him changing his mind any time soon.
The EUR/USD drifted lower today as the single currency wasn’t a match for the greenback. Investor sentiment in the eurozone remains upbeat, as the July Sentix report came in at 28.3, and Junes report was 28.4.
Commodities
Gold has lost ground again as the metal remains in the same downward move it has been in for the past month. The push higher in the US dollar is putting pressure on gold, and the strong headline non-farm number last week is making matters worse the commodity. On Friday, gold took out the May low at $1215, and even though it is off the low of the day, traders are cautious we could see further losses.
WTI and Brent crude oil are in the red today as the Baker Hughes rig count on Friday showed the number up active rigs rose to 763 – the highest since April 2015. Since this time last year, the number of active rigs in the US have risen by 117%. Libya and Nigerian are exempt from the OPEC production cut, but they may be asked to fall in line with the rest of the members at the meeting in St Petersburg at the end of the month. Traders have less faith in OPEC’s ability to influence the oil price, and the old fears of over-supply are driving prices lower.
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