NFP report lifts Dow above 17,000

After an excellent non-farm payrolls report, the FTSE has touched three-week highs and the Dow Jones has climbed above 17,000 for the first time.

US flag
Source: Bloomberg

FTSE hits three-week high

The non-farms number smashed expectations, allaying all concerns about the US economy in the second quarter, while a drop back in the unemployment rate was a further positive sign.The economic foundations of the rally remain in place, so now the focus will turn to earnings season and any additional merger activity.

The European Central Bank did its bit too, reassuring on interest rates and offering enough hints about quantitative easing to keep the market happy. For the FTSE 100, the big level of 6880 is still to be broken, but with a rallying mining sector there is every chance that this time will finally see us cross this line.

Dow hits 17,000

US traders can pack up and prepare for Independence Day celebrations contented this evening, having finally achieved Dow 17,000. Of course, markets are never happy so now we wait for the S&P 500 to hit 2000, not even 20 years after the index reached 1000.

This is a testament to the optimistic outlook of global markets and the underlying strength of the US economy, although there will be those warning that stocks are too pricey at current levels. Central bankers still seem to be giving a clear signal that policy will remain loose – clearly, the bull market isn’t done yet.

Gold drops after NFP report

Gold has endured its usual NFP volatility, dropping sharply in the wake of the strong number, although a modest rebound then occurred. However you view the NFP number, whether pushing equities higher on US growth optimism or causing the dollar to bounce on expectations of an earlier Fed rate hike, the end result is negative for gold and has cut away much of the upward momentum that had given the metal a lift back towards $1330. 

Oil has been abandoned in the general rush for equtities too, as receding Iraq concerns and hopes of more output from Libya took away the key catalysts driving the upward move.

EUR/USD could drop to $1.3500 

The substantially better NFP reading was good news for the dollar and the supporters of the US economy, treating us to the sight of a rallying US currency and more buoyant stock markets.Wage growth was not as encouraging, which points to inflationary growth staying anaemic, backing up Janet Yellen’s ‘noise’ assertion.

The nascent rally in EUR/USD has been cut off in its prime after Mario Draghi made appropriately dovish noises, leaving open the chance of another drop to $1.3500.

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