No wonder there is so much uncertainty in the equity markets with the amount of conflicting data coming out of the world’s leading economies.
A weak ADP Employment number came out as -10K at 1315 but seemed to have been completely forgotten by traders by 1500 when the ISM manufacturing data came out significantly ahead of expectations. There was also strong manufacturing data coming out of China, however this morning the Nationwide House Price Index in the UK saw a fall of 0.9% in August following on from a fall of 0.5% in July! The net result of all this was a 150 point rally for the FTSE and it has held onto those gains in early trading this morning and is back above the 5350 level.
Gold had $12 trading range yesterday with it making highs just above $1254 before profit taking knocked it back down to $1242. However, the strong upward trend line has not been broken and with one fund manager looking to $2000 by the end of the year, albeit probably talking up his own book, further appreciation looks to be the preferred direction for the metal. Oil reversed the losses it had seen the on Tuesday as it was once again clinging onto the coat tails of the equity market rally with WTI closing up over $2 at $73.80 despite a 3.5 million rise in oil inventories from the previous week.
The dollar had a weak day against Sterling with cable also reversing the losses of the previous day finishing above 1.5450; however it is Sterling that is looking weaker this morning as it continues the declines seen throughout August. Against the Euro the dollar struggled losing over 100 points and is now back up to 1.2800. It’s the ECB rate decision today at 1245 followed by Jean Claude Trichet’s press conference at 1330, which if you can sit through without falling asleep, usually has some fairly pertinent information which can cause a short term uptick in volatility. USDJPY went as low as 83.67 during intraday trading but rallied after the ISM figures as the outlook for the US did not seem quite so bleak and is currently at 84.15. There seems to be a real battle between the bulls and the bears with strong buying below 84.00 and selling above 85.50. The trend is still firmly negative for the currency pair over the medium term but it seems traders are becoming increasing wary to bet against further intervention by the BOJ.
There is a slew of economic data out today which should provide a further insight into the state of the UK, Euro zone and US economies. 0930 sees how the UK construction industry is recovering and at 1000 we get the Euro Zone GDP figures. Over the water this afternoon see the weekly jobless numbers which will be given extra scrutiny with tomorrows Non Farm Payroll data release and later at 1500 Factory Orders and Pending home sale data, the former being of interest to see if it can be as bullish as yesterdays ISM Manufacturing number or if it was a one off shining light in a still very murky global economy.
Click here to go to Capital Spreads
Simon Denham is Director of London Capital Group and Capital Spreads. We do not endorse the information and analysis available in this comment and it is provided purely for information purposes only and is delivered as a personal view by the writer. Under no circumstances is the information in this comment to be used or considered as an offer to sell, or a solicitation of any offer to buy. While all reasonable care has been taken to ensure that the information contained herein is not untrue or misleading at the time of publication, we make no representation as to its accuracy or completeness and it should not be relied upon as such. The investments referred to herein may not be suitable investments for all persons accessing this page. You should carefully consider whether all or any of these are suitable investments for you and if in any doubt consult an independent adviser. We accept no liability whatsoever for any direct or consequential loss arising from use of the information on this web page. Please see our Terms and Conditions.