US stocks advanced overnight courtesy of an encouraging jobs report and a better-than-expected read on the health of the US service sector.
Both the Dow Jones Industrial Average and the S&P 500 closed at two-month highs with gains of 0.4% and 0.6% respectively. The NASDAQ was the clear outperformer, closing 0.9% higher.
Gains for the day were broad-based with all but the telecoms sector finishing in positive territory. Consumer discretionary names led the day’s advance; healthcare and materials sectors both added 0.9%, with the latter being boosted by broadly higher base metal prices.
The financial sector saw gains of 0.3%, helped along by a 3.2% rise from Goldman Sachs which announced that it planned to spin off its proprietary trading division as early as this month.
However, noted banking analyst Meredith Whitney appeared to cap gains in the sector by suggesting that weak revenue growth would plague the major banks for several more quarters.
The Shanghai Composite saw initial weakness over speculation the government won’t relax its lending curbs to cool inflation. The banks there have been told they need to conduct their own stress tests to see how they would stand if property prices fell as much as 60%, the market taking this that the PBOC is still concerned that they have not done enough.
Across Asia, regional markets are mixed despite the distinctly positive aura stemming from the US session overnight. As at 05:30, the Nikkei 225 is 1% higher and clearly benefitting from a reprieve in the yen’s recent strength while the Shanghai Composite and the Kospi are weaker by 0.6% and 0.5% respectively. The Hang Seng is flat.
Turning to the UK and following on from yesterday’s session where it seemed a laboured market, with poor corporate news against a backdrop of better-than-expected US economic data, we should see the index get off to a more positive start.
Barclay’s earnings will be closely watched after the disappointment from Standard Chartered, whilst London is also expecting numbers from Aviva, Rio Tinto and Unilever amongst others. Deutsche Telekom and Commerzbank are both expected from Frankfurt whilst Kraft will follow on from the US after Wall Street closes. Add to this the latest monetary policy data from the UK and the eurozone and again it has the potential to be an active day despite the ongoing summer holidays.
Ahead of the open we're calling the FTSE up 8 at 5394, the DAX up 9 at 6340 and the CAC up 10 at 3770.
