FTSE lower as geopolitical nerves return

Heading into the close the FTSE 100 is 50 points lower, as non-farm payrolls euphoria wore off quickly this afternoon in London, and gains made in the wake of the US employment number were quickly given back. 

It appears that no one wants to be particularly long heading into the weekend with the risk of another development in the Ukraine crisis still an eminent possibility.

Mining pushed lower

The mining sector was given a hefty push lower as falling copper prices and a corporate bond default in China put the wind up investors. The news raises the uncomfortable prospect of more companies potentially following suit, which would have nasty effects on mining companies as growth slows in the world’s second largest economy. A slump in gold prices took its toll as well, resulting in a slew of red numbers for the sector this afternoon, with some of the biggest losers being African Barrick, Anglo American and Antofagasta.

Memories of last week, when no one even dreamed of the possibility of a Russian intervention into Ukraine, are driving markets. It seems a further stand off is developing, with the west edging tentatively towards sanctions and the Ukrainian government denouncing the planned Crimean referendum. However, the wily Russian president still holds the strongest hand, with his ace being the 30,000 Russian troops now reputed to be on the ground in the Crimea.

US markets bouyant

The Dow Jones and S&P 500 are having a better afternoon, able to remain more buoyant than their European cousins following an employment report that saw 175,000 jobs created (ahead of the forecast number) but the unemployment rate edge up to 6.7%.  The latter is still clinging on near its all-time highs, but there is a little further to go for the Dow before the same can be said. However, the general perception of today’s employment report is that it is ‘just right’ (to borrow from Goldilocks), suggesting both strength and weakness in the US economy. This means the Fed is less likely to accelerate tapering, and for equity markets that is a very cheery thought on a Friday.

Copper at seven-month low

The Chinese corporate bond default is knocking the stuffing out of copper, taking the red metal to a seven-month low. Fears about Chinese demand remain at the forefront here, and we are now pressing back towards the lows witnessed in both 2010 and 2013. This raises the possibility that a bounce is on the cards, although it will take some really positive Chinese news to lift copper back from the doldrums. 

Gold is enduring a similarly difficult day, although it has recovered from its lows of the day, as the US dollar rises thanks to expectations of continued tapering. The level $1360 seemed easily in reach earlier this week, but now it seems that we’ll revisit the lows of the current range at $1325 first.

FX pairs practice caution

Although it has come back from the highs of the day, USD/JPY continues its March upward progress, thanks to unchanged expectations on the tapering front. For now, however, ¥104 remains too much, and some Ukraine-related caution could mean that the yen enjoys something of a resurgence as the week comes to an end. 

Closer to home, EUR/USD has put $1.38 behind it, but it too has found a limit to its advance, being unable to sustain a position above $1.39.

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