Going into the close, the FTSE 100 has achieved an 11-week high, adding 1% on the day and breaching the 6700 level for the first time since early August. News that US unemployment had failed to meet estimates was like the cherry on top for additional equity upside.
Risk assets were back in vogue today, as strong updates from the likes of consumer goods specialist Reckitt Benckiser and mining giant BHP Billiton boosted investor sentiment. The mining sector has been under pressure of late, but with the market generally more upbeat on China's growth prospects, it was the key driver for the UK benchmark today.
ARM Holdings may well have been a casualty of the ‘sell the news’ brigade. Shares in the chip designer fell 2.45% despite some stellar Q3 earnings. The share price saw a greater sell-off in early trade, but the bargain hunters came in around the 950p level, helping to pare any intra-day losses. Profit before tax was £68.3m in Q3, compared to £55.3m in the prior year.
Public sector finances in the UK saw some improvement too, with higher tax revenues helping to narrow the deficit. The UK deficit number for September beat expectations by a small margin, coming in at £11.1 billion, but ultimately was significantly better when taken in a year-on-year context.
The focus was all on the non-farm payrolls today, and US futures refused to budge northwards with any conviction until the data was released. The 148,000 jobs added were much lower than the consensus expectation of 180,000, and when we look at the average jobs added over the past number of quarters there is evidence of a slow-down in this important metric. The Federal Reserve has made a lot of noise about wanting to see the jobless rate fall to 6.5% and, although the overall unemployment rate has fallen from 7.3% to 7.2%, the idea of tapering, let alone hiking interest rates, is a distant dream.
Apple is set to reveal the new versions of the iPad and the iPad mini at a media event in California later this evening. The level of interest in Apple in recent days has been reminiscent of the good old days, and the rise through the $500 per share mark has seen the price hit a nine-month high.
The Dow is currently trading up 40 points at 15,332.
The break above the $1325 per ounce level is somewhat pivotal for gold. The area has formed resistance to additional upside since the beginning of the month so, should we see a daily close here, there is potential for a $1374 test. This coincides with the 200-day moving average.
Additional weakness in the dollar cannot be ruled out and, given the low-quality employment numbers today, one should not expect any QE tapering this year. This should boost gold prices.
The demand for a safe-haven in the likes of the Japanese yen or the US dollar was elusive today, as risk assets continued their popularity. The New Zealand dollar was the top performer of the G10 currencies.
The euro rose to a 23-month high against the dollar, as the news that a property bubble may be emerging in German cities would tend to preclude any idea of negative interest rates from the ECB. Current momentum in the FX pair could see the 1.3850 levels reached over the next few weeks. One could expect to see a degree of dovishness from the powers-that-be at the ECB but, until the stress-tests are completed for the European banks, any moves to add liquidity into the system in the form of LTRO are likely to be merely theoretical.