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European markets took the opportunity to play in the July sunshine yesterday while Americans celebrated Independence Day. Having been under pressure thanks to unexpectedly hawkish US central bankers, traders were delighted that new boy Mark Carney and seasoned veteran Mario Draghi were so obliging yesterday, firing the starting gun on a new lurch higher for major indices. Attention now shifts back to the US, where those returning bleary-eyed after celebrations will have to wake up fast to cope with non-farm payrolls.
In London the mining sector is holding back the broader market, as the sector succumbs to a degree of profit-taking in the wake of yesterday’s central bank-inspired rally. Corporate data is thin on the ground again today, so non-farm payrolls will be the focus all morning, with traders opting to sit on their hands and await developments. The surge back above 6400 will have taken more than a few by surprise, but it probably presages a lot more choppy trading as the summer really gets underway.
Given that jobs data earlier in the week was fairly strong, we are expecting non-farms to show similarly healthy growth this afternoon, with the unemployment rate forecast to tick down slightly. If we do get good news it needs to be fed into the current ‘fear of tapering’ matrix, with markets worrying that strong numbers could bolster the case for an earlier withdrawal of stimulus. What they would ideally like is a mixed number, with either today’s figures missing expectations or last month’s growth revised downwards.