Caught between the European Central Bank and non-farm payrolls, stock markets have opted to do little, preferring to wait on developments. However, Mario Draghi’s decision to stay put on policy has seen the euro pushed back to the $1.37 level.
Kingfisher hits all-time highs
Fleeting gains and losses have been the order of the day in London, with the mining sector acting as a dead weight on the FTSE 100. ‘Buy the rumour, sell the fact’ was back in operation after several days of talk surrounding Chinese stimulus. When the actual news arrived, the reaction was one of studied disappointment, and we’re seeing the sector broadly in the red as the day continues. Some disappointment over a lack of action by the ECB has set in as well, and we’ve seen the broader index drop back below 6650 as the first sustained period of weakness for around a week sets in.
Kingfisher's rise to new all-time highs today is further good news for patient investors, but there has been something for the momentum crowd as Just Eat enjoys 8% gains on its first day trading. Just don’t mention that the company is worth 112 times earnings.
Dow's gains short-lived
The excitement in US markets came early in the session as the Dow Jones pushed through 16,600 for the first time in its history. However, any celebrations were short-lived, as the index, along with the S&P 500, dipped back into the red. A failure to close above here would indicate we might be in for a retest of 16,450, but with non-farms less than 24 hours away the sensible option will be to emulate the ECB and do nothing.
Economic news from the US was broadly of a negative disposition, with initial jobless claims, trade balance, services PMI and ISM non-manufacturing all falling short of expectations. However, hopes are high for tomorrow, with the median expectation being for a gain of 200,000 jobs as the US economy shakes off its winter sulk.
Copper downtrend continues
The lack of action from the ECB meant that there was little enthusiasm for gold or silver this afternoon, putting the dampeners on the India-inspired gains we saw yesterday. For silver, this failure to hold above $20 ensures that the bias remains to the downside, with $19.50 being the first target. Like the miners, copper was similarly unenthused by the China news, continuing the short-term downtrend.
Commodities remain vulnerable to any boost to the US dollar and treasuries if non-farm payrolls match expectations, and copper traders should keep a nervous eye on the $3 level.
EUR/USD above 100-DMA
At least there was activity in EUR/USD this afternoon in the wake of the ECB meeting. Mr Draghi adopted what might be charitably termed a more dovish attitude, saying he might act if inflation stayed persistently low for an extended period of time. Apart from blaming a late Easter (the central bank equivalent of blaming snow for poor Christmas sales), he did make a passing reference to the tools available in the monetary policy toolbox.
EUR/USD currently sits just above its 100-day moving average after testing $1.38, but at least $1.37 is intact for now.