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Quiet start expected for Europe, dealers eye US jobs data

Stock markets in Europe posted modest losses yesterday as a drop off in confidence towards the end of the session more than wiped out the gains that were registered earlier. 

For most of the day, equity benchmarks were in positive territory, upbeat sentiment circulated as it was believed the Biden administration will sign off on the $1.9 trillion spending programme in the next few weeks. European and US indices were dragged lower as there was as relatively sharp sell off in US tech stocks, hence why the FTSE 100 and eurozone markets ended in the red. It wasn’t a big decline but it was enough to remind traders there can be a bump in the road from time to time. By the end of trading in the US last night, the Dow Jones managed to post a record close, the S&P 500 finished fractionally lower, while the NASDAQ 100 lost 0.23%.

Trading in Asia was quiet as several countries, including China, are celebrating public holidays. Stocks in Hong Kong closed up 0.45%. A muted start is anticipated for Europe, indices are set to open a touch lower.           

Yesterday afternoon the WHO announced the AstraZeneca-Oxford vaccine is suitable for all patients over 18 years of age. France, Germany, The Netherlands and a number of other European countries have expressed concerns over the effectiveness of the drug on older patients so perhaps the various administrations might take the advice of the international body. The EU is already playing catch up with the UK in terms of vaccination rates so this might provide an opportunity to close the gap.

Jerome Powell, the head of the Fed, reiterated the bank’s commitment to supporting the economy yesterday. The Fed won’t even consider removing stimulus until the country is really through the pandemic. Lately there have been growing concerns that higher inflation is in the pipeline but Mr Powell said that an increase in inflation readings in the months ahead won’t mean much in terms of influencing policy. It is worth noting the US CPI rate remained at 1.4% in January so it is not like inflation is even a problem now. The labour market is still very far from being strong, said Powell.

The US dollar was in the red for much of the day but it recouped losses in the latter half of the session. Yesterday, the dollar fell to its lowest mark in two weeks but it finished off the lows of the day.         

Metals rallied as dealers took the view that if there is a rebound in the global economy in 2021 that should equate to increased demand for raw materials. The healthy manufacturing data from China in the last few months lifted industrial metals like copper and platinum, further gains were racked up due to the progress made with respect to vaccinations being distributed. President Biden is firmly in favour of environmentally friendly policies and platinum is used in catalytic converters. It is possible the six year high that that was notched up in platinum is down to the belief there will be a further drive to reduce vehicle emissions.

Oil recorded a new 13 month high on Wednesday in the wake of the EIA report as it showed that US oil inventories tumbled by 6.6 million barrels. The consensus estimate was for a build in stockpiles of more than 1 million barrels, so it took many in the markets by surprise. The energy has been rising lately as OPEC+ have held output steady. In addition to that, US stockpiles were already declining in advance of yesterday’s EIA reading.                    

The US jobless claims reading is anticipated to be 757,000, which would be a fall from the previous update of 779,000 – the lowest reading in nine weeks. The continuing claims level is predicted to be 4.49 million, down from 4.59 million. Details will be posted at 1.30pm (UK time).  Recently, there has been mixed jobs data from the US. Last week, the ADP employment reading hammered the consensus estimate and there was an upward revision to the previous reading too. Last Friday’s US non-farm payrolls report was underwhelming so that overshadowed the ADP update.                 

EUR/USD – Friday’s candle has the potential to be a bullish engulfing and if it moves higher from here, it could target the 1.2200 zone. Beyond that, it could retest 1.2349. A move below 1.1952, might bring 1.1800 into play.  

GBP/USD – since late September it has been in an uptrend, it hit a 33 month high yesterday. If the positive move continues, it could target 1.4000. A pullback might find support at 1.3569, the 50-day moving average.   

EUR/GBP – has been in a downtrend since mid-December and further losses might target 0.8670. A rally from here could see it hit 0.8996, the 200-day moving average.   

USD/JPY – Friday’s candle has the potential to be a shooting star, a move lower could see it hit 103.96, 50-day moving average. Should the wider uptrend continue, it might hit 106 or 107.