The IBEX 35 was been hit by profit taking as yesterday’s impressive bounce back was short lived. The decision by Madrid to suspend the Catalan Parliament is a short-term solution to the problem, as the two sides are still locked in a stalemate. The Spanish government is in the process of making it easier for companies headquartered in Catalonia to switch their head office to another part of Spain. While Madrid is keeping the pressure on Catalonia, it is likely that dealers will steer clear of the Spanish stock market.
Traders are looking ahead to the US non-farm payrolls report at 1.30pm. The consensus is for a reading of 90,000, and that compares with the previous reading of 156,000. The unemployment rate is tipped to remain at 4.4%. On a month-on-month basis, average earnings are expected to rise by 0.3%. It is likely that market volatility will remain low on the run up to the announcement.
Patrick Harker of the Federal Reserve stated the US central bank is still pencilling in a rate hike in December, and today’s data could give us a clue as to what they will do next. Traders will be paying close attention to the wage data in the announcement as it hasn’t been as impressive as the unemployment rate.
The GBP/USD is weaker because of the criticism Theresa May received in the wake of the Conservative Party conference, and it has shaken their confidence in sterling. The talk alone of May not lasting long in the top job is prompting dealers to dump the pound. According to the Halifax survey, average house prices in the UK rose by 4% for the three months until September, exceeding the consensus of 3.6%. The robust housing data wasn’t enough to prevent the drop in the pound.
The EUR/USD is softer on the day as traders gear up for the US non-farm payrolls report. Traders shrugged-off the strong German industrial orders data. Germany saw industrial orders jump by 3.6% in August, but it failed to spur buying of the single currency.
We are expecting the Dow Jones to open 2 points lower at 22,773, and we are calling the S&P 500 down 2 at 2550.
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