Market Comments

Heading into the close the FTSE 100 is 40 points higher, although weak US economic data means the index is firmly off earlier highs.

UK markets

From manufacturing this morning, the focus has shifted to employment, particularly the all-important US jobs situation, with the picture looking a lot less optimistic as we head towards the Friday jobs report. The FTSE 100 looks far healthier this afternoon than it did 24 hours ago, particularly since overnight futures had traded briefly below the 6700 low from earlier in the month. Miners have done well during the course of the London session, emboldened by China figures that went a little way to assuaging concerns about that economy, while tobacco firms were back in demand after yesterday’s modest selloff, as the poorer US economic outlook revived the yield attractions of Imperial and British American, along with other high dividend payers like utilities and insurers. Kingfisher however was firmly out of favour, languishing at the bottom of the index as investors took a more sanguine approach to the firm’s future and the country’s diminishing love for spending their weekends putting up shelves and assembling flat-pack furniture.

US markets

US markets failed to live up to the promises set this morning by futures, which had predicted a reasonably calm open. American employment numbers have been one of the few reliable figures in recent months, but as the country approaches full employment it will be very hard to sustain the impressive run of good jobs reports. The private ADP figure was well below expectations, while the employment component of the ISM manufacturing index was only just in expansion territory. To make matters worse exports and new orders were also poorer, and we can thank the stronger dollar for this impact. Indices did manage to recover as the session matured from the opening minutes, as the see-saw action of the past month continues to frustrate traders of all types. The major sticking point is that the market has run out of catalysts to spark real rallies. The failure of indices to hold on to highs after the latest Fed meeting illustrated this point nicely, and the coming earnings season is unlikely to help, being a vehicle for US exporters to whine about the stronger dollar. US markets got left behind in Q1 by their eurozone counterparts, and the new quarter has started in a similar fashion.

Commodities

With both stocks and the dollar failing to find the positives in the afternoon session, it was left to commodities to make life interesting. Gold and silver had looked firmly weaker this morning, continuing their form of recent days, but the afternoon’s data provided buyers with the excuse that they had been waiting for. Gold moved back to $1200, and the swift reversal meant the metal enjoyed its best day in two weeks. Oil rallied hard as well, but this commodity is still stuck in an endless chop-chop battle between buyers and sellers, making life very difficult for all concerned.

FX

The determination of buyers in GBP/USD to defend $1.48 is admirable, if perhaps misguided given the longer-term outlook for the pound against the dollar. The pound was little moved by an eight-month high in UK manufacturing data, but the dollar was forced to retreat in the afternoon after the poor jobs data from the US, allowing sterling bulls to take control. If US data continues to disappoint then more rangebound trading between $1.48 and $1.50 is in order here, but this is just a temporary consolidation before the pair recommences its long-standing downtrend.