Like yesterday, European equity markets have been pulled into the red by the tech-led declines in the US. 

Stocks were showing modest gains on the back of the US non-farm payrolls report, but the bearish moves in the US rocked confidence over here. The headline reading showed that 1.37 million jobs were added last month, and keep in mind that economists were expecting 1.4 million, so it was basically in line with forecasts. The July figure was revised slightly lower to 1.73 million, from 1.76 million. There was a big drop in the unemployment rate as it fell from 10.2% to 8.4%, easily beating the 9.8% forecast. The yearly average earnings metric came in at 4.7%, and the July level was revised down to 4.7% from 4.8%. Overall, it was a pretty good report. The sizeable fall in unemployment really stood out. The rate of job creation is cooling, but that is to be expected.

The FTSE 100 is holding up better than its continental counterparts as the rally in copper has helped mining stocks like Anglo American, Glencore and Antofagasta.

Barratt Developments, Persimmon, and Taylor Wimpey are some of the biggest fallers on the London market as it was reported the Competition and Markets Authority are investigating them over allegations of unfair practices in relation to leasehold agreements. The sector isn’t too popular with certain sections of the public because many of builders made huge profits because of the help-to-buy scheme, while there have been suggestions that asking prices were inflated.

Ryanair shares are bucking the wider negative trend as the company managed to raise €400 million form a stock placing yesterday. The low-cost airline wants to strengthen its balance sheet, and it is giving itself the option to expand should an opportunity pop up.   

US

The fears that sparked yesterday’s major sell off are still circulating as the tech-focused NASDAQ 100 has taken out yesterday’s low and it is showing a sizeable decline today – it is down over 3.5%.

The jobs data bodes well for the US economy but seeing as there has been an enormous disconnect between US indices and the economy recently, a robust economic report might not be able to assist sentiment.

In a way, the latest unemployment numbers might be bad for the stock market as Republican politicians have less of an incentive to reach a deal with the Democrats with respect to the coronavirus relief package. Steven Mnuchin, the Treasury Secretary, said he reached an informal deal with Nancy Pelosi, the House Speaker, to avoid a government shutdown, but the bigger picture stimulus package is still far from being brokered.

In relation to the powerful decline in tech stocks, some people would say the upward move was irrational and excessive, so the correction will probably be similar.   

Until recently, stocks like Apple, Facebook, Netflix, Tesla and Netflix were the darlings of the market, while they are all down at least 4% today. The second day in a row of big losses. 

FX

The US dollar index is up for the fourth day in a row as the healthy jobs report helped the dollar push higher. On Tuesday, the greenback fell to a 28 month low but it has been rebounding since. It was already in good shape ahead of the employment numbers, and it appears that traders have snapped up the relatively cheap dollar as it is clear the US recovery continues.  

GBP/USD and EUR/USD are suffering on account of the US dollars upward move. It is worth noting that the euro and the pound have enjoyed bullish moves versus the dollar recently so now we are seeing a bit of a reversal.

USD/CAD is broadly flat as Canada also posted decent jobs numbers. The unemployment rate for August dropped to 10.2% from 10.9%, while economists were expecting 10.1%. The employment change showed that 245,800 jobs were added, and that was a small bit below the 275,000 forecast. Keep in mind, the July level was 418,500.

Commodities

Gold has been hit again by the positive move in the US dollar. The metal is traded in dollars so when the currency rises it tends to have a negative impact on the commodity. It is no coincidence that gold has been pushing lower since Tuesday morning – when the dollar’ began its recovery.

WTI and Brent crude have tumbled again as traders are still worried that US demand for gasoline tumbled last week. The report showed that US gasoline demand fell to 8.78 million barrels per day (bpd), from 9.16 million bpd – it paints a picture of less economic activity. Keep in mind the latest manufacturing and services data has been respectable, and today’s jobs report point to an improvement in the economy.