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European markets saw another positive session yesterday with a new record high for the German DAX, while the FTSE100 fulfilled its role as the perennial party pooper with another disappointing session and closing lower for the second day in succession. This was mainly due to weakness in metals and energy prices with Brent crude prices closing at a 5-month low.

US markets also struggled for gains with the Nasdaq 100 closing higher due to a strong performance from the Magnificent 7 led by Apple, and Nvidia, while the Russell 2000 finished the day over 1% lower, with the S&P500 and Dow closing little changed.

The indifferent finish seen in the US has been shrugged off by Asia markets with a strong session there after the Bank of Japan’s latest Tankan survey showed a big improvement in manufacturers sentiment with the auto sector with the second successive month of gains as chip shortages eased.

This rebound in Asia markets looks set to filter through into this morning’s European open with the DAX set to open at a new record high.

Yesterday’s economic data from Europe pointed to a modest improvement in services sector economic activity, while the latest US ISM service sector numbers were a mixed bag, with the headline number coming in ahead of forecasts at 52.7. Prices paid did slow but by less than expected, coming in at 58.3 pointing to stickier than expected inflation, while the employment index edged higher to 50.7.

Today we get a look at the latest ADP payrolls report for November as an appetiser for Friday’s non-farm payrolls report. We are starting see increasing evidence that the US jobs market is starting to slow, with vacancies falling to their lowest level since March 2021 and with the last two ADP reports adding a combined 202k new jobs as private sector hiring slows.

October saw 113k jobs added an improvement on September and November is expected to see an improvement on that to 130k, given that a lot of additional hiring takes place in the weeks leading up to Thanksgiving and the Christmas period so we’re unlikely to see any evidence of cracking in the US labour market this side of 2024.

We also have the latest rate decision from the Bank of Canada where we aren’t expecting any changes to monetary policy here with the central bank forecast to keep rates unchanged at 5%.

The last 3-months have seen no growth in the economy at all while the October jobs report saw a rise of 17.5k jobs, all of these were part time positions. On full time employment we saw the first decline in jobs growth since May with a decline of -3.3k, while unemployment rose from 5.5% to 5.7% and the highest level since January 2021. We’re also starting to see inflationary pressure continue to subside with core CPI on the median slipping from 3.9% to 3.6% in October. 

EUR/USD – Has fallen below the 200-day SMA at 1.0825, with a fall below the 1.0800 level raising the prospect of a move towards the 50-day SMA just below the 1.0700 area. Resistance now at the 1.0940 area, and behind that at last week’s highs at 1.1015/20.

GBP/USD – The failure to move above the 1.2720/30 has seen the pound slip back towards support at 1.2580/90 area. A break below 1.2570 signals a deeper pullback towards the 1.2460 area and 200-day SMA. A move through the 1.2740 area signals a move towards 1.2820. 

EUR/GBP – Has found support at the 0.8555 area and is currently looking to recover through the 0.8600 area. While below the 0.8615/20 area, the risk remains for a move towards the September lows at 0.8520, and potentially further towards the August lows at 0.8490.

USD/JPY – Currently trying to rally off the recent lows at the 146.20 area, with resistance now at the 148.10 area. Looks vulnerable to further losses while below this cloud resistance with the next support at the 144.50 area.

FTSE100 is expected to open 25 points higher at 7,514.

DAX is expected to open 56 points higher at 16,589.

CAC40 is expected to open 20 points higher at 7,407.

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