Daily Market Commentary

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Daily Market Commentary: (Morning Report)

London Market Report

London open: Stocks fall ahead of key US jobs data
Market Movers

• techMARK 2,105.42 -0.23%
• FTSE 100 5,852.66 -0.16%
• FTSE 250 12,104.81 +0.11%

The FTSE 100 opened slightly lower on Friday morning following a strong rise the day before, as investors showed caution ahead of some pivotal economic data due out across the Pond later today.

Financial trader Shavaz Dhalla from Spreadex said that investors are nervous about taking on too much risk ahead of the "market-moving US non-farm report" due out at 13:30 London time.

Dhalla said: "The current US president as well as candidate for the presidential position will also be keenly eyeing the jobs figure.  The consensus for the change in the number of employed people is 123,000. 

"However, a figure which comes in below expectations will not only prove damaging for investors' confidence in the global recovery but could act as sufficient ammunition for the leading presidential candidate to launch an offensive on the failures of the current US president's measures to stimulate growth."

Europe Market Report 

Europe open: Investors waiting on critical employment report
-Investors waiting on US employment report

FTSE-100: -0.12%
Dax-30: -0.18%
Cac-40: -0.31%
FTSE Mibtel 30: -0.52%
Ibex 35: -0.48%
Stoxx 600: -0.03%

European equities have started the day slightly lower, as traders pull in their horns –especially following yesterday´s gains- and ahead of the release, this afternoon, of the latest monthly employment report Stateside.

For some any effect from Sandy will only show up in next month´s data, so by itself that should not be a factor in next week´s Presidential elections. However, the bad weather –should it persist- could yet play a role. In any case, today´s data is the last before Americans head to the polls, so even more is in play today than usual.

Acting as a backdrop, some reports are calling attention to the recent improvement in the Baltic Dry Freight index, usually a good indicator for global commerce and growth.

Also of interest, in today´s Financial Times James Mackintosh tells readers that recent market moves –rises led by cyclicals- show that there is quite some optimism as regards economic growth. In his opinion, however, that is only justified if one believes that central banks have more ammunition left in their armouries –or not- as Governor King has recently suggested.

Other considerations to be taken into account by the shortest-term investors and traders are that the last two months of the year are usually amongst the best for equities and the still relatively ´bearish´ sentiment of small investors, according to the latest weekly survey data out from AAII.

Eurozone PMI slightly ahead of forecasts

The Markit Eurozone purchasing managers index for the month of October
has come in 45.4, versus last month´s reading of 46.1 (Consensus: 45.3).

The Markit German purchasing managers index for the month of October
has come in 46, versus last month´s reading of 47.4 (Consensus: 45.7).

The Markit French purchasing managers index for the month of October
has come in 43.7, versus last month´s reading of 42.7 (Consensus: 43.5).

Single currency dropping towards technical support ahead of data

The euro/dollar is now down by 0.53% to the 1.2878 dollar level.

Front month Brent crude futures are off by 0.399 dollars to the 107.74 dollar mark in ICE trading.

US Market Report

US close: Stocks rise on positive economic indicators Dow 13,233 +137 Nasdaq 3,020 +43 S&P 500 1,428 +16 US stocks moved firmly on Thursday, getting November off to a positive start following a set of broadly positive economic indicators ahead of Friday's monthly employment report. As an aside, and as regards the impact of Sandy, Credit Suisse today told clients that: "While the event is certainly traumatic for those living through it, we think the overall impact on economic activity is likely to be small. After Katrina, which was a much bigger disaster, the stock market actually rose by 2% in the two weeks after the event. US reinsurers have typically outperformed in the 12-month period after major natural disasters on the back of improvements in pricing - however, given that natural catastrophe losses overall this year have been mild, this might not happen this time." All of the above ahead of tomorrow´s all important monthly employment report. Ironically, if Sandy does have an effect on the recollection of data for the same it should not be evident until the following month -and after the elections- some are saying. The October ISM manufacturing sector purchasing managers index (PMI) came in at 51.7 points, versus the 51 expected by the consensus. The new orders sub-index rose to 54.2 from 52.3. Even so, the Chair of the relevant survey Committee, Bradley J.Holcomb, has said that the rise seen in new orders is deceitful. The Conference Board´s consumer confidence index for October came in at 72.2, below the 73 forecast. However, the previous month´s estimate has been revised down to 68.4 from 70.3. Also worth noting was that the bulk of the rise came from the current situation sub-index, which is a moderately negative aspect of the report. The ADP employment report showed 158,000 jobs were created in October (Consensus: 135,000). Markit´s US manufacturing sector purchasing managers´ index (PMI) came in at 51 for October, after 51.3 for the month before (Consensus: 51.3). This release is not to be confused with the much better known PMI from the Institute for Supply Management (PMI). And the data storm continued... Unemployment claims fell by 9,000 to 363,000 (Consensus: 370,000). Nevertheless, and as a possible note of caution, data from New Jersey and Washington DC had to be estimated due to Sandy. The number of job cut announcements reached 47,724 in October, versus 33,800 for the month before, according to consultancy Challenger. Unit labour costs dropped by 0.1% in the third quarter (Consensus: 0.8%). Construction spending increased by 0.6% month-on-month (Consensus: 0.7%) in September, while the previous month´s reading has been revised notably higher. Notable rise in crude futures as well Front month West Texas crude futures settled 0.99% higher at $87.09 on the NYMEX. 10-year US Treasuries were falling by 10/32 dollars, with yields at 1.73% at the close.