NFP number sparks rallies in US indices

As the week comes to an end markets are finishing strongly, with the FTSE 100 up more than 40 points and US markets surging away yet again.

Wall Street sign in front of US flags
Source: Bloomberg

FTSE reaches session highs

A pleasingly in-line jobs report from the US has allowed the FTSE 100 to reach session highs as Londoners look to enjoy the afternoon sunshine and raise a glass to the veterans of D-Day. With 217,000 jobs created in May, some worries about the US economy have been dispelled, with the in-line number staying just the right side of positive to encourage equity rallies without sparking a rush for the US dollar.

BA owner International Consolidated Airlines was the biggest gainer on the top 100, pushing out to month highs, while broker comment has supercharged Aggreko shares. Looking into next week, a dovish ECB and a reasonable non-farms number should prove equity markets with the rationale to add to their gains.

Jobs report lifts US markets 

Rallies in US indices were broad-based this afternoon, as the NFP number acted as a positive catalyst for fresh highs. Worries about the data below the headline, such as weak wage growth and a slowdown in actual payroll growth, helped to deter investors from rushing towards the US dollar and Treasuries, so all the necessary conditions were in place for the Dow Jones and S&P 500 to build on the post-ECB enthusiasm. 

Silver loses upward momentum

Gold and silver found themselves friendless and unable to push on from yesterday’s gains, after non-farm payrolls dampened the attraction of these traditional safe havens. Silver bulls, in particular, should be worried that $19 remains unbroken, as it signals the upward momentum of Thursday was more Draghi-inspired short covering and that the white metal could now be girding itself for further losses.

It was a better day for NYMEX however, as US jobs growth signalled further strength in the US economy, but not enough to spark mass buying of the US dollar. The brief journey below the 50-day moving average has ended and now we look for further gains back towards $104.

Euro open to further weakness

$1.3660 remains the limit of EUR/USD’s ambitions today, a repeat of yesterday’s price action. The negative reaction to today’s NFPs leaves the euro open to further weakness, with a push sub $1.3600 not out of the question. Next week is reasonably light on economic data, but particularly so for the eurozone, and in the absence of this the currency pair could find itself prey to losses as traders continue to mull over Mr Draghi’s commitment to ‘do more’. 

For the pound UK unemployment on Wednesday gives traders something to strive for, and expectations of yet another good print on UK job numbers could see the $1.6800 level retaken early on Monday.

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