Europe Last night's rather hawkish takeaway from the December Fed minutes initially lent a softer tone to European markets in early trading today, especially so given market anticipation about today's US non-farm payroll numbers after the much better ADP report seen yesterday. Given the anticipation of a good number it was perhaps inevitable that the actual numbers would once again diverge from the ADP number and disappoint raised market expectations. Rather perversely the fact that the numbers were disappointing has seen markets push higher, with the FTSE100 hitting its highest levels since May 2011 when it touched 6,100, on the basis that the small rise in the unemployment rate to 7.8% makes it less likely that the Fed will look at stepping back from QE in the shorter term. Even allowing for the move higher in equity markets, volumes continue to remain light, while the worst performing sector is the basic resources sector, weighed down by a broker downgrade to Fresnillo, while a sharp move lower in gold and platinum prices hasn't helped either with Randgold Resources and Polymetal also lower. High street bellwether Marks and Spencer is also getting a bit of beating ahead of its latest results next week as investors fret that they will disappoint. On the plus side BP is higher after its Gulf oil spill partner Transocean settled its dispute with the US Department of Justice at a lower rate than was expected. Also doing well are the more defensive sectors with telecoms and health care stocks having a positive day, with BT and Vodafone higher on the day. US US markets opened slightly mixed after the December jobs report, came in as expected, disappointing those who had expected a much better number in light of the ADP report yesterday. What it did do though was take the sting out of the market reaction to the unexpectedly hawkish spin on last night's FOMC minutes. With new jobs increasing by 155k and the November number revised up to 161k from 146k, investors seemed caught between two stools. It was the slight increase in the unemployment rate to 7.8% that saw investors take the view that the Fed would be unlikely to step back from QE anytime soon, given the comments that they would only reconsider if there was a "substantial improvement" in the unemployment rate. In other economic data the December services ISM also came in much better than expected at 56.1, well above expectations of 54.1. November factory orders were more disappointing, coming in flat below expectations of a gain of 0.4%. FX After being positive for most of the day the US dollar has slipped back sharply in the afternoon session, particularly against the Japanese yen as traders took some profit on recent gains. A pullback in US 10 year yields from their highest levels in 7 months at 1.97% has also prompted some profit taking and some US dollar selling. The single currency hit its lowest levels against the US dollar for three weeks after last nights Fed minutes suggested that further QE could have a limited shelf life. Sentiment wasn't really helped by disappointing services PMI data from France, though Spain and Italy did improve slightly. The pound has lost ground across the board after this morning's disappointing services PMI data suggested that it was now much more likely that Q4 would be a negative quarter. The poor reading of 48.9 was the worst reading since the snow affected December 2010 in a sector that has expanded for every month since then. With construction also disappointing this week and with it being the main drag on GDP for most of 2012 it also increases the probability of a ratings downgrade sooner rather than later. The Canadian dollar has had a particularly good day after the latest jobs report showed an increase of nearly 40k jobs in December and the unemployment rate fell from 7.2% to 7.1%. Commodities Gold prices have pulled back from the lowest levels since August last year after the small rise in the US unemployment rate pared back expectations that the Fed would consider stepping back from further QE, despite the market interpretation of last nights Fed minutes. Crude oil prices have struggled to react with conviction one way or the other, though they have pulled off their lowest levels of the day after this afternoon's US data.