European equities are on the rise as we head into the final session of the week, with the now commonplace gains for the FTSE 100 taking place alongside similar upside moves for the CAC and DAX. The European session looks likely to represent somewhat of a lull compared to The US with markets eagerly anticipating the latest jobs data released later today. Nonetheless a surprise decline in French industrial production has served to highlight the ongoing challenge faced by the ECB, coming off the back of yesterday’s ongoing manufacturing PMI contraction across the French, German, and eurozone economies. In the UK, financials are once again providing a reliable source of gains, coming off the back of a period that has seen the likes of HSBC and Standard Chartered capitalise on elevated interest rates. Once again, we have seen Anglo American shares in the spotlight, with the stock trading 3% higher on hopes of a bidding war after Glencore were said to be considering an approach after the initial failed bid from BHP.
Uncertainty surrounding the impending US jobs report appears to have taken a back seat for now, with yesterday’s Apple earnings providing a boost to sentiment given that it served to remind markets of the power of share buybacks. With 78% of the S&P 500 having reported, recent market jitters appear to have started to ease as observed through a sharp decline in the VIX in the past 10 trading days.
Looking ahead, todays US jobs report does provide a potential banana skin for markets, with a resurgence in wage growth looking like the biggest potential hurdle to market sentiment today. Coming off the back of five consecutive NFP beats, the speculation of a decline in the payrolls figure could simply set us up for another strong figure. While much of the payrolls outperformance has come from double counting via part-time roles, the depressed nature of US unemployment does essentially signal that the Fed can hold off for as long as they need to. The sharp rise in the quarterly employment cost index this week does provide a warning that we might seen a resurgence in wage pressures, further reiterating the Fed’s need to remain steadfast in a bid to drive down inflation pressures before cutting rates.
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