Strong US jobs report sees small reaction

Heading into the close, equity markets are finishing with decent gains, but the reaction to a strong US jobs report seems oddly muted.

US flag
Source: Bloomberg

BHP loses 2.1%

As we head into the final weeks of the year, UK investors should be worried that the preponderance of resource and oil stocks in the FTSE 100 will make life difficult for the index.

Yet more declines for oil prices this afternoon have put firms like Tullow and Petrofac the bottom of the performance table, while miners are also down as a stronger dollar knocks back commodities, with Anglo American shedding 2.5% and BHP losing 2.1%.

Banks are doing well however thanks to the better US jobs report, which has revived hopes of a US rate hike in 2015, with traders betting that fixed income operations will see more activity as central bank rate activity returns to markets after an extended leave of absence.

Over on the continent the DAX is rallying yet again, putting its post-European Central Bank wobble firmly behind it. A close above the summer highs could ignite the next stage of a rally here, especially following yesterday's afternoon chatter that some form of ECB quantitative easing is still on the cards come January. 

Non-farm payroll figure 321,000

Dip buyers continue to be frustrated by US indices, with buying opportunities being of the ‘blink and you miss it' variety. Today’s job number was way above expectations, at 321,000, while the numbers for September and October were also revised upwards. However, the price action wasn’t quite as might have been expected, with US markets posting modest gains.

Wage growth data was good too, which certainly makes the Federal Reserve picture more varied, and hints at an earlier rate hike in the year to come. Like UK banks, US banks were rallying on hopes of higher interest income in coming years.

Goldman Sachs shares were in high demand, as the price broke through its high of 2009 and pushed on to levels not seen since the first half of 2008.

More bad news for gold advocates

The dollar strength story was seen in commodities once again, with heavy losses recorded for oil despite the hopes of higher consumption provided by the surge in US jobs. Monday’s bounce in oil is a very distant memory, and anyone still hoping for a rally should be confined for their own safety.

The same probably applies to gold bulls – even if the ECB moves next month the Fed’s gradual move to tightening will prove a more than adequate counterweight. A close below $1190 today would signal a break out of the rangebound trading of this week, which can only mean more bad news for gold advocates.

EUR/USD close to lows of 2010

The non-farm reading sent the dollar soaring against the yen once more, breaking above ¥121 for the first time since 2007. The gap between the Fed and other central banks continues to widen, even if a disappointing set of factory orders this afternoon dented the broadly dollar-bullish atmosphere.

Meanwhile EUR/USD has taken another step in the direction of the lows of 2010 and 2012, with the 200-month moving average looking under threat. Mario Draghi may have sent the euro higher yesterday, but the rally proved to have the lifespan of a sick fruit fly, merely providing the shorts with yet another opportunity. 

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