Europe
European equity markets were already enjoying a continuation of the positive move since Wednesday, and the dovish update from the European Central Bank (ECB) pushed eurozone stocks higher.
The ECB said they will not be looking to taper their stimulus package until at least December, and traders took this opportunity to pick up stocks. In effect, the central bank gave the green light to buyers as they don’t have to worry about tapering for a few months.
The ECB are known for their convenient timing, and it is not a coincidence the announcement came on the same week as the euro spiked against the US dollar and the pound. On Tuesday, the FTSE 100, DAX and CAC 40 all dropped to multi-month lows, and we could see renewed buying from here.
Mining companies are in demand today after the Caixin survey of Chinese manufacturing came in above expectations. The August reading was 51.6, while traders were anticipating a drop to 50.9, from 51.1 in July. This is a private survey, and is deemed to be more impartial than the official figures from Beijing.
Vedanta Resources (LON:VED), Antofagasta (LON:ANTO), and Glencore (LON:GLEN) are higher on the day because of the data. A robust manufacturing sector in China is good news for basic resource stocks as the country is a major buyer of minerals.
US
US stocks are in positive territory as traders digest the disappointing US jobs data. On one hand, a soft jobs report, holds back the Federal Reserve from hiking interest rates, and at the same time it is not good news for the economy. In August, 156,000 jobs were added, while economists had expected 180,000, and the July figure was revised down to 189,000 from 209,000. The unemployment rate ticked up to 4.4% from 4.3%, and the consensus was for it to remain at 4.3%. On a month on month basis average hourly earnings increased by 0.1%, down from 0.3% growth in July.
Overall, it does not paint a glowing picture of the US economy. Investors like the feel good factor of buying stocks when the economy is growing at a decent rate as the trickle-down effect is visible. Some dealers don’t feel comfortable buying on the back of bad news, and hoping it will defer the Fed’s monetary tightening plans.
FX
EUR/USD saw a lot of volatility today as the US jobs data was quickly followed by an announcement from the ECB. The US dollar dropped like a stone on the back of the underwhelming US non-farm payrolls report, but the dovish commentary from the ECB prompted a turnaround in the single currency.
The ECB announced they won’t be tapering their bond buying scheme until at least December. Both bits of information are dovish, but the ECB’s news could trigger a euro sell-off since there was so such money poured into the single currency in the past few months.
The GBP/USD received a double boost today as an impressive British manufacturing report strengthened sterling in the morning, and a tepid jobs report from the US added the to move. The pound was helped by the strong UK manufacturing data for August. The reading came in 56.9, and economists were expecting 55, and the July reading was 55.1.
The pound was pushed to its highest level against the US dollar in over two weeks after the weaker than expected jobs report was revealed.
Commodities
Gold hit another new nine-month high today on the back of the disappointing US jobs figures. The all-round poor report has set the Federal Reserve back from tightening monetary policy. Even before the figures were released, traders were factoring in a low probability of an interest rate hike in December, and now it has further diminished.
WTI and Brent crude are fractionally higher on the day, and the energy market was nudged higher by the stronger than expected ISM manufacturing report from the US. The jump in manufacturing activity spurred buying of oil. The wider picture for the energy market is still a bit gloomy as some refineries in the US are out of commission due to the tropical storm Harvey. A number of banks have trimmed their price forecasts for oil, which is playing into the mix also.
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