It has been a busy morning for economic data, and the disturbing scenes in Egypt are adding to investor nerves today. Much anticipation was built up yesterday in the hope that economic figures from Germany and France would prove to show signs of health in the eurozone’s strongest pillars. And that has proved to be the case, with the Gallic economy rising from recession. However, it is better to travel than to arrive, hence the somewhat muted reaction in continental markets. In London all eyes were on unemployment figures and the Bank of England. While the former was good, the latter’s minutes showed that Mr Carney’s writ does not run entirely unchallenged. Such disturbances bode ill for the future.
Rows about political donations aside, recent news has been good for the British government, showing that things appear to be on the mend. Today’s employment data shows further growth, with claims dropping in July and the three-month figure rising by more than expected. Combine that with a rise in house prices, and the government’s re-election chances begin to look brighter. Signs of disagreement in the halls of Threadneedle Street dampen the image of an all-powerful governor, but it was good news for GBP/USD, which jumped higher as investors hoped that the flicker of resistance to Mr Carney’s forward guidance will increase in coming months, possibly leading to an earlier-than-expected rise in interest rates. For the FTSE 100, however, it remains business as usual. The index was unable to sustain yesterday’s move above 6600, although the effect of stocks going ex-dividend has to be taken into account. European markets are edging upwards, however, and given time they may drag the FTSE 100 higher during the session.
With US markets still within easy reach of their recent highs, now is not the time to become overly cautious on markets. However, we continue to lack the catalyst that will lift Wall Street from the summer doldrums. Today is unlikely to provide that either, with only PPI data and crude inventories on the calendar. Given the swathe of negativity surrounding the prospects for Europe, perhaps today’s GDP numbers will encourage a more optimistic attitude to the eurozone from our American cousins. Ahead of the open, we expect the Dow Jones to start 30 points lower, at 15,420.