It’s been a busy week really; economic news, geopolitical concerns and tapering worries have all have been thrown at investors in one form or another, and although the FTSE 100 and S&P 500 have made some headway, the overall impression is one of extreme caution. With non-farm payrolls out today, this caution has only been heightened.
With little corporate news this morning traders have been left bereft, falling back on the current narrative that the British economy is showing some remarkable resilience at long last. Although off the highs seen yesterday, the pound continues its steady ascent against the US dollar, a trend that has persisted since mid-July. For the FTSE 100, it looks as if the recovery above 6500 has provided a floor upon which further gains can be built. Of course, a strong NFP reading this afternoon could reignite fears of tapering and undo all the good work of the past five days.
ADP numbers were a shade weaker yesterday, but we are still expecting a gain of around 180,000 for the month of August in non-farm payrolls. It would take a fairly poor reading to even hint that tapering might be delayed, but of course not so weak as to suggest that the US economy is not as strong as previously thought. Such are the delicate margins within which the US Federal Reserve has to work. Ahead of the open, we expect the Dow to start 15 points lower at 14,920.