FTSE keeps gains amid mixed US jobs report

Markets are on the back foot as the weekend approaches, with a mixed report on US jobs providing an excuse to book gains early. 

London skyline
Source: Bloomberg

Fresnillo up 5%

The FTSE 100 stands out alone among major indices this afternoon in holding on to some of its gains. A weaker dollar has led to a late-stage rally in commodities, which is providing a reason for a rally in mining stocks, which so far have taken little part in the parabolic rally.

A surge in gold and silver is helping too, with Fresnillo up 5% and Randgold Resources adding 2.5%.

Chinese CPI, retail sales and industrial production next week should ensure that the raw materials sector stays in the spotlight.

Reports from Ukraine led to a volatile afternoon in the DAX on Thursday and today indications that Russian troops are again on the move saw the index dive below 9300 once again. So far dips below here have proven to be buying opportunities, with optimism surrounding potential European Central Bank measures still giving the index a mind to test the waters around 9500. 

Non-farm results not as expected

The rally off the October lows has confounded many a seasoned trader, but we may be seeing just another dip this afternoon in the move higher. Non-farm payrolls were not as bullish as had been suggested by the ADP and ISM reports earlier in the week, giving a gloomy tone to the Friday open for US indices. However, a drop in the unemployment rate and upward revisions to the previous month’s figure helped to counter the pessimism.

Janet Yellen added to the excitement of the afternoon with comments about a slowing global recovery and potential volatility arising from a steady rise in interest rates, and in their volatile Friday condition markets were not in the mood to listen calmly. However as the US session entered full swing the S&P 500 moved back into positive territory, with an element of dip buying still in evidence even on the final day of the week.

Gold could stall at $1180

The long awaited bounce in gold and silver seems to be finally underway, but I don’t expect it to rally much more from this point onwards. We’ve seen the yellow metal clamber back above $1150, but even this does little to change the broader trend. With the metal now no longer oversold and the dollar still broadly preeminent, I suspect we will see the bullish momentum stall around $1180 and the selling start again.

There has been a small rally in oil prices too, helped along by the overall optimistic tone from non-farm payrolls. Even so, with the supply situation still pointing towards more losses we should still see Brent touching $80 in coming weeks.

EUR/USD gains likely to reverse

The modest gains for EUR/USD today do nothing to change the picture of a currency that is set for further declines. No one cares to bet against either the ECB or the Federal Reserve, with the latter tightening and the former edging towards loosening policy. It’s still a dollar world, which means today’s moves are likely to be reversed as the new week gets underway and dollar longs look to reassert themselves.

The coming week will also be a big one for GBP/USD, with UK unemployment and a Bank of England inflation report on the cards.

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