Volatility is really making trading conditions rather difficult at the moment as just when you think the market’s about to make a more concerted move in one direction it turns around and heads off in another.

Neither bulls nor bears seem to know where the next big move is going to be, making trading conditions rather treacherous. Yesterday was the perfect example of where Europe had spent most of the day in positive territory until the bad ADP payroll figures from the US were released sending the Dow tumbling dragging the FTSE and Dax with it. Once the session was over with the FTSE ending in the red, the futures suddenly spiked back up again.

This morning the FTSE is trading at around 5335 at the open, just higher on last night’s close.  Now for the fourth time in just over a week the index has bounced off the 5280/5300 level, so this is where the major support is seen over the near term.  The Dax actually broke below its nearest term support around 6260 but the bigger level in focus is 6200.  The German index is a little lower at the open.

June is a month where interestingly the FTSE has seen more falls historically than rises. The declines are also far larger on average than the rises with the month as a whole being quite a volatile one. If I was a betting man then I would probably favour history repeating itself considering what lies ahead this month. There’s a FOMC meeting that is likely to be the last major event for the Federal Reserve for them to announce something about plans for QE3 ahead of the US elections without it looking too “political”, and of course there’s the Greek election in just over a fortnight.

We’ve also seen already this morning the yield on German bunds hit a record low and we are now at the stage whereby investors are paying the German government to buy their debt for two years, an indication of risk aversion if ever there was one.

Not to forget that today’s economic data focuses on the good old NFP.  Yesterday’s weaker than expected ADP number was one of the cases of the volatility and today may be no different if the figure is just as disappointing.  At the moment few people are willing to stick their neck on the line in Europe ahead of the data and for many European investors this week end is an extended one, in particular for the UK with a double whammy of bank holidays.

But before then we get UK manufacturing PMI data which in April fell to 50.5, just above expansion territory and a fall that was much more than expected. With the double dip recession confirmed and eurozone crisis escalating there’s little chance of the number staying above the 50 level this morning.

The risk-averse sentiment in the markets sent the euro to a fresh 22 month low against the greenback on concerns the situation might be so complicated the IMF is making preparations behind the curtain.  The shared currency closed down at 1.2359 and looks to be under ongoing downside pressure.  Later today, the US nonfarm payrolls report will undoubtedly be closely watched, especially when the Chinese figures on manufacturing released overnight were disappointing.  Another hope bites the dust?

Gold prices finished slightly lower yesterday, $2.77 at $1559.8 as investors remained concerned by the deflationary threat.  However, if since the beginning of May the precious metal followed the euro down, in the last two weeks it seemed to have stabilised just above the $1550.00 mark.  At the same time the EUR/USD, or crude oil for that matter, continued to decline.

No chance for a breather in the energy sector as long as the US economic data continued to fall short of expectations.  On top of that, the weekly crude inventories statistics, released yesterday due to Memorial Day holiday, showed a higher than anticipated build in crude stocks.  So, it came as little surprise to see the WTI crude prices touching a new low for the year, finishing $1.02 down at $86.53.

This comment is from Capital Spreads.

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