Europe
European markets have struggled to hang onto the gains seen yesterday and had a rather mixed session over concerns that the extra measures announced by the European Central Bank won’t be effective in boosting economic growth and inflation in the euro area in the coming months.
If anything yesterday’s limited measures make any likelihood of some imminent “shock and awe” action that much less likely in the near term, until the effects of both the TLTRO’s, and the details of any new ABS program are assessed, which could be well into next year.
That being said the announcement of a ceasefire in Ukraine has tempered some of the downside risk particularly in the German DAX which has remained fairly well supported throughout the day.
While we saw a welcome rebound in German industrial production in July, the confirmation of no growth in EU GDP for Q2 highlighted the deep problems within Europe against a backdrop of ongoing geopolitical tensions.
The basic resource sector is again on the slide as iron ore prices continue to come under pressure, while the inability of Silver and Gold prices to rally is also weighing. Once again Fresnillo Plc (LONDON:FRES) and Randgold Resources (LONDON:RRS) are among the bigger fallers.
BP (LONDON:BP) shares which slid sharply yesterday are stabilising after the company was heavily criticised in by a US court for its part in the 2010 Deepwater Horizon Gulf of Mexico oil spill.
US
US markets were expected to open sharply lower today, but that was before we got a surprisingly weak August jobs report.
For the last couple of days US markets have really struggled to make new highs and closed lower three days in a row, which suggests that investors were starting to run out of good reasons to keep buying stocks, against concerns that the Fed might be compelled to tighten monetary policy sooner rather than later.
Today’s disappointing numbers of 142k did pull stocks off their pre-market lows, but were enough to just about drag US markets into positive territory in the minutes after the open. This shouldn’t be too much of a surprise given that the weak number probably puts back the prospect of a Fed rate hike into the back end of 2015, but the effects have been short-lived, as market has struggled to push back into positive territory.
The overriding feeling is that this is likely to be a one-off, subject to revision, given this week’s positive ADP payroll numbers, manufacturing and services surveys, which were all quite positive.
The numbers broken down were a rise of 142k in August against an expectation of 230k, while the unemployment rate dropped to 6.1% from 6.2%, while the participation rate dropped from 62.9% to 62.8%.
FX
The US Dollar hasn’t had it all its own way today after today’s US payrolls number for August undershot expectations by over 80k coming in at 142k, bringing to a halt the recent positive progress of the greenback against the Australian dollar, the Japanese yen and the New Zealand dollar.
The EUR/USD also staged a bit of a comeback having found a bit of base around 1.2920, but it still looks set to close lower for the eighth week in succession, its worst ever weekly run of losses.
Commodities
Gold prices have enjoyed a nice uplift from that poor payrolls number, but are still on course to finish the week lower, along with silver which has also been under pressure this week.
Whether it is concerns about a slowing European economy impacting on demand, or today’s disappointing US jobs numbers, oil prices for Brent and WTI have remained under pressure today and look set to remain weak, with US prices in particular finding it difficult to rise with supplies remaining fairly high.
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