Europe
European stocks initially picked up where they left off yesterday opening higher, but they have struggled to make any significant gains given the strong up move seen yesterday, and spent most of the afternoon session trading into and out of negative territory.
The FTSE 100 once again has found it easier to remain in positive territory, while the German DAX and French CAC 40 have struggled.
While US stocks continue to trade at and make new record highs, European investors continue to adopt a more cautious approach, despite some fairly good Spanish unemployment numbers this morning, and an outstanding UK construction PMI report for June.
The best performers today have been in financials and the mining sector with Standard Chartered (LONDON:STAN) leading the way. Investors also appear to be digesting the latest boardroom reshuffle at Marks & Spencer (LONDON:MKS), with the shares moving cautiously higher.
The main drags on the index have been ex-dividend stocks as Royal Mail (LONDON:RMG), Burberry (LONDON:BRBY) and British Land (LONDON:BLND) all lost ground after losing their payout attractions.
Also lower airline stocks have continued their slide in the wake of yesterday’s negative note on the sector from Bank of America with Easyjet (LONDON:EZJ) and International Airlines Group (LONDON:ICAG) both lower.
US
US markets opened around the flat line today with the main talking point being as to whether or not the Dow 30 will trade above the 17,000 level after a much better than expected ADP jobs report.
For several weeks now markets have been drawn to the 17,000 level on the Dow, and the 2,000 level on the S&P 500 like iron filings to a magnet.
The question is will the market get its wish, or will the approach of this week’s long weekend in the US introduce an element of caution if, or once, we get there.
This morning’s ADP numbers for June showed a rise of 281k, well above the most optimistic of expectations, and over 100k above the May number.
It is certainly a great way to round off the second quarter of the year, and does seem to suggest that the US economy is finally shaking off the worst of the Q1 deep freeze. Over the second quarter ADP jobs growth averaged 222k per month, compared to 171k in Q1.
If the same pattern is repeated tomorrow on non-farm payrolls then we could well be in for a similar positive end to the quarter. Looking for correlations between the two reports is always fraught with danger, but if the pattern of the last five months is repeated then we could well get a high number.
Being more conservative I’m going to take an average between the quarterly performances of both reports.
In Q1 non-farm payrolls averaged 190k, and ADP averaged 170k, whilst in Q2 ADP has averaged 222k, which could suggest that we could well get a number in the region of 240k for tomorrow’s payrolls number to maintain the current correlation, between the performance of the ADP and NFP.
Today’s ADP number does appear to have prompted some upward revisions to this week’s initial estimate of 210k.
FX
Another five year high for the pound today after construction PMI for June came in well above the 60 level with strong rises in new orders prompting a significant expansion in jobs growth across the sector.
Once again residential construction was the best performing area, along with commercial building activity. There were some concerns about rising input prices which could well translate into rising prices later in the year.
The US Dollar has enjoyed a rather better day today after this afternoon’s better than expected ADP number, pushed US yields higher, with the Australian dollar the worst performer after some disappointing trade balance numbers early this morning.
It would appear that the high value of the Aussie is starting to hinder export performance as exports slid 5% from the previous month.
The euro has also found it difficult to rally ahead of tomorrow’s ECB meeting after comments from French finance minister Valls that the ECB needed to do more to weaken the euro.
Commodities
Copper prices have continued to gain ahead of tonight’s Chinese services data, while silver and gold prices are also finding support.
Corn prices are continuing to come under pressure as recent USDA reports showed that crops in the US were set for record yields.
Brent crude prices have set aside concerns about the situation in Iraq and chosen to focus on the fact that supplies from Libya appear to be on the verge of restarting.
.
CMC Markets is an execution only service provider. The material (whether or not it states any opinions) is for general information purposes only, and does not take into account your personal circumstances or objectives. Nothing in this material is (or should be considered to be) financial, investment or other advice on which reliance should be placed.
No opinion given in the material constitutes a recommendation by CMC Markets or the author that any particular investment, security, transaction or investment strategy is suitable for any specific person.