European equity markets had a strong start to the day but have stalled a bit since the release of the US non-farm payrolls report. 

Europe 

The headline US jobs figure came in below estimates and even though the previous month's figure was revised higher, it failed to boost sentiment. The FTSE 100 reached a fresh all-time high today but has since retreated. The biggest gainers in the London equity benchmark are Centrica and United Utilities, after Credit Suisse upped their ratings for both stocks. Shares in Johnson Services Group are up 1.4% after the company stated that trading is going well, and it should exceed its full-year guidance. The share price has been pushing higher since 2012, and if the upward trend continues it could target 160p.

Eurozone indices such the DAX, CAC 40 and the FTSE MIB are higher on the session as the respective countries posted solid manufacturing and services figures this week. The eurozone inflation rate has fallen back today to 1.4%, from 1.5%. The slide in the cost of living could leave the door open to additional monetary easing from the European Central Bank, and this is also helping continental stocks.

US

Its business as usual on Wall Street as the Dow Jones, S&P 500 and NASDAQ 100 all posted new record highs. The bullish sentiment surrounding US stocks was fuelled by the announcement of the latest non-farm payrolls report.

In December, the US only added 148,000 jobs, way below the 190,000 that was expected. On the bright side though, the November figure was revised higher to 252,000 from 228,000. Unemployment remained at 4.1% and average earnings on a monthly basis came in at 0.3%, while traders were expecting 0.2%. Overall the report was so-so. The fact that the headline figure missed expectations dampens rate-hike prospects, which is good for equity markets. The figures paint a picture of a US jobs market that is motoring along. The major US indices are looking quite over-stretched, but the buying appetite doesn’t appear to be waning.  

FX

GBP/USD is largely unchanged on the day even though it experienced high volatility on the back of the US jobs report. The pound has been gaining ground versus the US dollar since March last year, and even though we have seen some pullbacks from time to time, the positive trend is still in place. There were no major economic announcements from the UK today, but traders are still mindful of the strong services data yesterday. The fall in the pound in the wake of the EU referendum is helping the British economy.

EUR/USD is lower on the day after the drop in the inflation rate in the eurozone put pressure on the single currency. Eurozone CPI slipped back to 1.4% in December, meeting expectations. The November reading was 1.5%, and this decline in the cost of living will concern ECB chief Mario Draghi. The languishing inflation rate in the eurozone could prompt Mr Draghi to keep the ECB’s monetary policy loose, as it suggests that consumer demand is weak. The euro had a good run recently so this was an excuse to take profits.

Commodities

Gold is slightly softer today in the wake of the US jobs report. The disappointing headline figure sparked a flurry of buying, but then traders realised the remainder of the report was robust and the market turned south. Gold has been pushing since mid-December and while it holds above $1300 we could see the positive move continue.

WTI and Brent Crude oil are in the red as profit-taking from the recent positive run has kicked in. The political protests in Iran, robust manufacturing figures from around the globe, and the extremely cold weather in the US drove oil to a new two-and-a-half year high during the week. Dealers are locking in their profits ahead of the weekend.

At 6pm (UK time) Baker Hughes will announce the active rig count and the consensus is for a reading of 747, unchanged from the previous reading.

 

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