US employment report stirs markets but rally fizzles out
00:00, 02 November 2012
· By Sales Trading
European markets sparked into life in the afternoon session after a quiet morning after the latest US jobs report came in much stronger than expected and in the process removed the last economic banana skin for President Obama between now and election day.
US October payrolls added 171k jobs while the September number was also revised up to 148k from the previous 114k, even though the unemployment rate ticked up to 7.9% this was pretty much expected and already baked in.
Despite the better numbers the initial gains proved to be somewhat short-lived as markets fizzled out like a damp firework ahead of the weekend and the outcome of next week's US elections.
Company results are still pushing share values around with Royal Bank of Scotland publishing its latest set of numbers, posting a loss of £1.26bn for the quarter, after adding another £400m to its PPI provision.
Also lower is car insurance company Admiral which has slid back after it issued a cautious trading update on the back of slowing revenues in Q3.
On the upside upbeat broker comment has underpinned Tullow Oil, after the shares were upgraded by JP Morgan Cazenove.
Also higher is British Airways owner International Consolidated Airlines continuing its gains on expectations surrounding its results next week after some well received updates this week from sector peers Lufthansa and Air France KLM.
US markets took their cues from the better than expected October payroll numbers, pushing to their highest levels in a week; however the lack of follow through buying ahead of the weekend has seen the gains run out of steam, and markets slip back.
Factory orders for September also came in better than expected rising 4.8% after declining 5.1% in August.
Earnings continue to come thick and fast with stocks to watch including Starbucks and LinkedIn in the wake of the release of their latest numbers after the bell last night.
Starbucks announced earnings of $0.48c a share, beating expectations of $0.45c, while the company also raised its 2013 earnings forecast.
Professional social networking site LinkedIn also beat market expectations for Q3 and also raised its guidance for the current year.
Apple continues to flirt with the 200 day MA as the downtrend since the highs of mid-September. Is there a danger that the Apple success story is starting to wear a bit thin, given some customer disquiet about the new iPad release so soon after the last one in March and the controversial decision to replace the connector on new Apple devices.
The US dollar had already been trading higher prior to the payrolls number, but the better than expected jobs data gave it an additional shove higher with the single currency already under pressure due to the confirmation of poor manufacturing PMI numbers, and in particular the disappointing German and French numbers.
The US dollar also hit its highest levels against the yen since 27th April on the better than expected numbers helped in some parts by this week's additional easing measures by the BoJ.
The pound has had a good day hitting its highest levels against the euro since 3rd October after UK construction PMI came in above expectations, returning to expansion for the first time since the July numbers.
The Swiss franc has also slid against the US dollar helped by comments from SNB's Jordan that there the Swiss franc remained overvalued at current levels.
If today's payrolls number is positive for risk someone forgot to tell copper and oil prices with the red metal sliding back sharply on continued growth concerns, as well as worries that Chinese demand will continue to slip back, while European growth looks set to remain negative until next year.
Oil prices have also remained weak despite the better than expected payrolls number as continued uncertainty and ample inventories weigh on prices.
Gold prices have also come under pressure slipping below $1,700 for the first time since the beginning of September as capital continues to rotate out of the traditional safe haven play as US economic data continues to point to some form of recovery, albeit a weak one. The yellow metal could fall as far as $1,663 and the 200 day MA after breaking below support at $1,700.
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