US markets lead resurgence

US unemployment claims are at a five-month high, as the BoE remains dovish among continued commodity weakness.

Traders outside the London Stock Exchange
Source: Bloomberg

A positive open to the US markets is helping European indices bounce back this afternoon, providing welcome respite in a week that has been largely characterised by selling and bearish sentiment. Initial strength has been helped along by relatively supportive data, where US unemployment claims hit a new five-month high and the Bank of England (BoE) released a batch of minutes which were unexpectedly dovish.

Today’s spike in US unemployment claims brought about a joint five-month high of 282,000 claimants. Despite this, the market remains relatively muted, with an overwhelming feeling that the Federal Reserve needs something highly significant to move it off its course of a December hike. With two solid payrolls numbers in the past two months, it seems highly unlikely that unemployment claims can derail the FOMC train.

The BoE’s decision to keep rates steady came with a twist in its tail, with minutes revealing that continued oil price weakness is driving greater expectation that inflation, and thus interest rates, would be lower for longer than many expect.

Glencore shares jumped higher today, with the firm leading the gainers on the day in London. The ability to proactively cut costs may be cheered for now, but with Anglo American cutting its dividend this week, it is likely there will be more pain before any gain for long-term investors. As Brent crude teeters at an 11-year low, there is a feeling the worst may not be over quite yet for the oil and gas sector.

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