Europe outperforms, dollar dips
The mood in Europe is positive as we approach the close of trading. At the end of last week, European indices finished on a downbeat note as the latest quarterly updates from Amazon and Apple impacted the sentiment. The two stocks in question are down again today, but traders on this side of the Atlantic have shrugged off the moves. A strong performance from oil titans, BP and Royal Dutch Shell, has helped the FTSE 100 hit its highest mark since February 2020. The Eurostoxx 50 reached a 13 year high as Europe is playing catch up with the bullish mood in the US. The S&P 500 registered yet another all time high in early trading but it has slipped into the red.
Broadly speaking, volatility is reasonably low as traders are gearing up for an important week. In the next few days, we have interest rate decisions from the Federal Reserve, the Bank of England and the US non farm payrolls will be posted too. Today’s US ISM manufacturing data was well received as it came in at 60.8, a touch higher than the 60.4 forecast. The internals of the ISM update were interesting as the prices paid metric jumped to 85.7, the employment component increased from 50.2 to 52. While the new orders metric dropped to 59.8, from 66.7. It is concerning that costs are still rising even as new orders are cooling. It is encouraging to see the employment reading is increasing and that has informed dealers’ expectations with respect to the jobs report on Friday.
At the back end of last week, the US dollar saw violent swings. It sold off sharply in the wake of the European Central Bank meeting on Thursday but then had a monster rally on Friday, whereby it pulled back all of the losses in the previous session. Today it is a little lower on account of profit taking. The US 10-year yield is fractionally higher at 1.587%, the yield has been broadly moving higher since the middle of last week, which ties in with the wider uptrend since August. The Fed might announce tapering on Wednesday, but when you take into account the very disappointing headline non farm payrolls figures in the past two months, the central bank might look to hold fire until the October report is released. Gold and silver are taking advantage of the dip in the greenback. The metals saw sharp declines on Friday but now the dust has settled, and the weaker dollar has made then more attractive.
