Rebound in risk appetite fizzles out

Aside from gains in the Dow, indices have struggled to make headway on the first day of the new working week. 

Indices have generally failed to maintain the bullish atmosphere from Friday’s US jobs report, holding in the red aside from the Dow. Hopes that Friday’s report could prompt a renewed equity rally seem to have fizzled out for the time being, although dip buying has been seen in the Dax and other European indices. Meanwhile the Dow seems to be in a world of its own, crossing the 35,000 mark for the first time in its history thanks to a bounce in healthcare and retail names. But with earnings season winding down and strong seasonality now behind us for the time being it looks like indices will continue to struggle; historically May is a month of digestion for indices, representing a slowdown in forward momentum from the opening months of the year, and if Friday’s jobs report isn’t enough to move the market on into new territory then it is hard to see what will. 

Sterling traders seem unperturbed by the prospect of the UK economy moving into another period of political uncertainty, as the elections put the SNP’s independence plan back on the agenda. An attritional battle through the courts to decide on the legality of a referendum seems likely, taking some of the shine off the prospects for the UK economy. Nonetheless, with the dollar now finding it harder to rally in the wake of the non-farms report it looks like sterling can still make headway for the time being.