Both UK stocks and the British pound were steady in early Wednesday trading after the release of labour market statistics for October. On the FTSE 100, the financial sector buying frenzy set off by hopes of deregulation and return to higher rates was offset by a speculative collapse in industrial metals that is weighing on the shares of mining companies.
Data released on Wednesday showed the rate of unemployment falling to 4.8%, a new 11 year low. Average earnings rose 2.4% 3m/m as expected but unemployment claims rose more than forecast. Unemployment at a decade low is a clear positive for the British economy as it rides into a period of greater uncertainty brought about by the pending exit from the European Union.
The rate of job growth has decelerated but this is likely more a function of nearing economists’ definition of ‘full employment’ than because of a Brexit-induced slowdown. Key to the continuing resilience of the UK economy is that wages are growing faster while the rise in consumer prices has eased off. That puts more spending money in people’s pockets.
Homebuilding shares fell in sympathy with shares of Barratt Developments (LON:BDEV) after a third quarter trading update. Demand for housing is not a problem- Barratt launched 69 new developments since July, up from 51 in the same period last year. Talk of a slowdown in London’s property market played into the fear of a more severe downturn in house prices. London’s property market is typically a leading indicator for the rest of the UK.
The price of copper looks vulnerable. Copper and other industrial metals including iron ore could be on course for the inevitable bust that follows every speculative boom. The source of the speculation is China. Chinese commodity futures volumes almost tripled the daily average this month.
Traders arbitraging Dalian, London and Chicago futures have caused global prices to reflect the Chinese speculation. The higher volume has not been matched by open interest, indicating the new traders are not holding into positions very long. When the momentum starts to fade as it has, the buyers are likely to drop out.
US stocks look set for a lower open with the future Donald Trump presidency still front and centre. There has been a lot of Hoo-hah over Donald Trump’s cabinet appointments as well a staff reshuffle. Concern that a disorganised transition of power bodes badly for once Trump is in the White House is understandable, though probably a little premature at this early stage.
USA pre-opening levels
S&P 500: 2 points lower at 2,178
Dow Jones: 41 points lower at 18,882
Nasdaq 100: 7 points lower at 4,757
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