Another positive day on European markets has seen equities hit 6 month highs largely as a result of a blowout number for January employment data out of the US.
January non-farm payrolls confounded market expectations, coming in at 243k, 103k above market consensus of 140k, while the unemployment rate declined again to 8.3%, its lowest level since February 2009.
It makes the recent caution displayed by the Fed Chairman Bernanke about the state of the US economy all the more puzzling for investors.
Nevertheless markets liked what they saw and sent blue chips sharply higher.
The FTSE 100 spread trading market blasted through the 5,800 level to post its highest level since August last year as markets seized on the numbers as evidence that the US recovery remains on track.
The biggest gainers have been in the telecommunications and financial sectors.
Lloyds and Barclays are the pick amongst the banks while telecom giant BT Group saw profits rise 18% for the quarter.
The best individual performer has been insurance group Admiral after it announced it was extending its reinsurance agreements with several foreign reinsurers until 2014.
The party poopers for the day have been in the oil and gas sector with Petrofac lower along with Royal Dutch Shell as investors mulled over yesterday’s disappointing results.
Gold miner Randgold Resources has also slid back in line with a weaker gold price.
US shares spread trading markets surged on the open in the wake of this afternoon’s better than expected January payrolls report, led higher by financials with Bank of America jumping sharply while Caterpillar also outperformed.
The positive sentiment was also carried forward with January Non-manufacturing ISM beating expectations of 53.2, coming in at 56.8.
These better than expected numbers suggest that market expectations of Q1 growth in the US could well get revised higher.
The US dollar has been somewhat mixed today, suffering against the Australian dollar after Chinese services PMI though showing a little weakness due to the Chinese New Year holiday, still managed to show expansion.
The Japanese yen has slipped back sharply on the back of this afternoon’s US data as capital flows back into the dollar as this afternoon’s data makes QE3 much less likely in the short term.
As a result, the single currency has also slid back, on talk that the meeting of Eurogroup finance ministers scheduled for Monday has been put back due to continued divisions about how to close the €15bn funding gap on the next Greek bailout.
Talk of the Greek PM threatening to resign sent the single currency lower while the Dutch PM insisted that the shortfall would have to come from further reforms and pay cuts.
Gold prices have slid sharply on this afternoon’s economic data out of the US as speculation about further Fed easing gets pushed into the background.
Silver prices have followed suit as the US dollar has rebounded on the better economic data.
Oil prices, on the other hand have benefitted from the better economic data seen out today pushing back towards the recent range highs for Brent, above $114, while tension in the region limits the downside, on speculation about Israeli intervention.
US crude prices have also bounced back but still remain near the bottom end of their recent ranges due to the surplus in stockpiles at Cushing.
Not surprisingly given the robust economic data seen this afternoon copper prices have jumped sharply as speculation rises that the US economy is on the mend and the economic data will continue to improve.
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By Micheal Hewson, Analyst, CMC Markets.
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