Europe
European markets had been on a firmer footing even before this afternoon’s US jobs report, given that the ECB surprised nobody by leaving policy unchanged.
Heading into the long US weekend expectations had been high that this afternoon’s US jobs report was going to be a good one, and I’m sure the ECB President had his fingers crossed that the numbers would follow on from yesterday’s ADP numbers, and help make his job easier in terms of weakening the euro at the expense of the US dollar.
It turns out he needn’t have worried, as not only did the June numbers beat expectations, but the April and May numbers were revised up as well, while the unemployment rate dropped to 6.1%, as the numbers beat across the board, with Q2 jobs growth averaging 272k, well over the Q1 average of 190k.
Average hourly earnings also edged higher as well in a sign that the Federal Reserve could well find it more difficult to ignore inflationary risks in the months ahead, and this concern appears to be being reflected in the bond market as US bond yields jumped sharply.
Against this backdrop Europe’s markets have remained well supported continuing to build on this week’s gains with the German DAX regaining the 10,000 level for the first time in nearly two weeks.
The best performers on the FTSE 100 have been the miners again after this morning’s Chinese HSBC services PMI data for June came in ahead of expectations at 53.1, well above 50.7 the previous month. Leading the way we’ve seen gains from Antofagasta (LONDON:ANTO), Fresnillo Plc (LONDON:FRES) and Anglo American (LONDON:AAL), with Antofagasta gaining from an announcement of cost savings at some of its Chilean operations.
Sports Direct (LONDON:SPD) was also higher as investors put behind them the saga of Mike Ashley’s controversial bonus scheme, while both Easyjet (LONDON:EZJ) and British Airways parent company International Airlines Group (LONDON:ICAG) were also rebounding after five days of declines.
Poundland appears to be living up to its reputation as the best of the IPO’s by delivering a healthy set of numbers in its first statement as a public company. Its plans to open new stores in the UK and also in Spain look set to deliver the company further growth opportunities as it tries to deliver the US model to the UK market. Companies like Dollar Tree (NASDAQ:DLTR), generates billions of US dollars of turnover in a market where it has to compete with grocery giants like Wal-Mart Stores (NYSE:WMT), Publix, Costco and Krogers, so there’s no reason to suppose Poundland can’t do the same thing.On the downside oil stocks have slid back as oil prices hit two week lows, with Royal Dutch Shell (LONDON:RDSa) , BP (LONDON:BP) and BG Group (LONDON:BG) also lower.
US
US markets cracked open the bubbly today and look set to go into the long weekend with a smile on their faces, after the June employment report lived up to, and exceeded expectations, with the Dow opening above 17,000 and advancing strongly above it.
There was very little wrong with any of the data with the May trade balance shrinking to -$44bn and weekly jobless claims coming in at 315k.
The sharp jump in hiring seen in both payrolls reports, over the last two days has raised expectations of a strong rebound in economic activity in Q2, though we could see some limit to the gains ahead of the long weekend.
The Services ISM for June also showed a decent expansion, coming in at 56, but was below market expectations of 56.3.
FX
Having been the whipping boy for the last few days the US Dollar has had a rather better day today being the best performer on a good day for the greenback.
The worst performer has been the Swedish krona which slid sharply after the Riksbank cut interest rates 0.5%, surprising markets who had expected a 0.25% cut. While concerns about deflation remain the overriding reason for the reduction, this cut certainly isn’t going to take the heat out of Sweden’s overheating housing market.
The Australian dollar has also slid sharply after retail sales slid for the second month in a row and RBA governor Stevens took aim at the currency saying that he felt the dollar needed to fall substantially and not just by a few cents.
The euro has slipped back, more as a result of the impressive US payrolls numbers, than by anything said by ECB President Draghi at his press conference today. The ECB President did update the markets on his plans for his new TLTRO plan and maintained that rates would remain lower for an extended period.
Commodities
Fears of tight supplies have continued to recede on the oil market and this has provided the catalysts for oil prices to push down towards two week lows, as fears about a disruption to the southern Iraqi oil fields diminish.
Gold prices have slid back on the back of the strong US payrolls numbers as markets, but have pulled back from their lowest levels and continue to remain fairly well supported on dips.
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