US jobless claims higher-than-expected

The US Federal Reserve’s chairman Ben Bernanke did a stellar job in taming the recent downside bias that came from the volatility in equity markets.

The mere phrase that we would see ‘a highly accommodative policy’ for the foreseeable future gave relief to investors, and was sufficient to charge risk sentiment and send indices rocketing up sharply.

European markets

The FTSE retreated from the sugar-highs seen in the futures market overnight and has settled around the 6550 level. Growth sensitive stocks were the clear gainers today, with the mining sector surging led by Fresnillo which added 12.3% owing to a surge in gold and silver prices. 

Defensive stocks were very much out of favour with G4S in the doldrums amid ruminations that it will be investigated by the Serious Fraud Office for overcharging for tagging criminals. The share price declined by 5.67%.

Portuguese equities bucked the trend as political turmoil again rears its ugly head. The financial sector was the worst hit with the main banks falling by an average of 4%.

US markets

US jobless claims coming in higher-than-expected affirmed the Bernanke view that unemployment remains a sticky issue in the overall US economy picture. The number of Americans filing new claims rose to 360,000; an increase of 16,000, with many attributing the rise to seasonal factors. Investors took the data as a signal that the Fed would be likely to delay any dialling down of quantitative easing in the near term in an effort to spur more job growth.

US indices flirted with their record closing levels, with the S&P 500 breaching its highest closing level ever as it rose for the sixth consecutive day. The Dow is currently trading up 146 points at 15,434.

Commodities

Oil has pulled back off its highs, dropping below the $106/bbl level because the International Energy Agency predicted an increase in production next year. The market is likely digesting the International Monetary Fund reticent growth forecasts too, which will certainly weigh on demand. Supply concerns in regard to the Egyptian political upheaval also appear to be marginally less ominous.

Gold has powered ahead dramatically today, breaking some key technical levels but remaining hampered by $1300 per ounce as the idea of an elongation of quantitative easing put pressure on the dollar and re-ignited fears of imminent inflation. 

Copper also caught a bounce on the weaker dollar, pushing to a three-week high, and looks set to test the $3.20/lb level for the first time since April.

FX

The euro played with the 1.32 level against the dollar briefly in the aftermath of Mr Bernanke’s speech; the sudden strength in the single currency threatens to undo much of dovish guidance put forward by the European Central Bank (ECB) last week. The ECB monthly bulletin echoed much of what Draghi had to say, however the more hawkish commentary from Bundesbank’s Jen Weidmann has seen the euro settle in the middle of the recent trading range.

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