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The Bank of England (BoE) and European Central Bank (ECB) have delivered no surprises, but with the headlong rush to non-farm payrolls now firmly underway it was always unlikely that the central banks would provide more than the briefest of distractions. Still, with economic data looking better both Mark Carney and Mario Draghi will be glad that they don’t have to look too far for good news, and it looks as if a tentative recovery is underway in markets, after weeks of indecision.
As expected there was no change from the BoE, leaving investors in London to concentrate on corporate news. Supergroup continues its transformation into a normal company, albeit one with a share price that has leapt over 100% this year. Now that all the hype has dissipated, a more sober approach can be cultivated, and for now it looks as if the company really is delivering on its promises, with the brand still remarkably resilient for a trendy fashion label. Broker upgrades did their bit for InterContinental Hotels and Marks and Spencer, the latter being viewed as a useful play on any recovery in UK consumer spending.
It was a slightly mixed picture for US data, with the ADP number coming in below forecasts, while factory orders and the ISM non-manufacturing reading proving better than forecast. All this is just a prelude to non-farms tomorrow; the importance of tomorrow’s employment reading is hard to over-estimate, given that the next US Federal Reserve meeting is barely a fortnight away. The effect is being felt in bond markets, as borrowing costs rise and the ten-year US Treasury Bond edges to 3%.
Increased tapering expectations have meant that gold and silver are in retreat once again, both dropping to two-week lows. In oil a general absence of talk regarding Syrian intervention means that there has been less activity in this market, although traders will be watching the G20 meeting for any possible signs of movement. Given the current animosity between Washington and Moscow, we shouldn’t expect to see any great shifts in positioning among the major powers.
There was little comfort for the euro this afternoon, as traders sold the single currency in the wake of the ECB press conference. Mr Draghi sought to emphasise that the bank would stridently counter any suggestion that rates would rise in the near future, since the shoots were still ‘very, very green’. Given the split on the council, the most likely outcome is that they will do nothing, but it may be wise not to goad policymakers too much.