One day up, the next day down and so we continue to hover around the highs of the recent rally and once again a dip has offered buyers yet another opportunity to pick up stock. It almost seems that the market is going to rise no matter what happens with the earnings, bar the old slip lower at some page. The S&P has now surpassed the 1070 and its September high, the Dax has done the same and the FTSE is not far behind. Our call for the FTSE was for it to have a strong open up some 50 points but this turned out to be a little pessimistic as the index opened up some 60 points.

Today sees the major US banking giants start to report Q3 earnings with JP Morgan today, Goldman Sachs and Citigroup tomorrow and then Bank of America on Friday. Expectations are high and so investors are jumping into equities now so they don’t miss out on what’s expected to be a bumper quarter for the banking sector.

Even as the earning season gets fully under way we have a great deal of economic data to digest. Yesterday saw UK inflation fall more than expected and today we see UK employment numbers. The rate of unemployment is expected to rise from 7.9% to 8.0% and average earnings are due to remain capped. There are indications that the labour market is stabilising with firms opting to put a cap on wages as opposed to cutting jobs, however this won’t prevent the rate of unemployment continuing to rise with current expectations of a peak around the middle of 2010 within a range of 8.5% to 9.5%.

So, the recovery of the UK labour market is a long way off and in past recessions the peak in unemployment usually comes some 12 to 18 months after a recession. On top of this for employment to reach levels of pre-recession levels this can take three to five years and it’s difficult to forecast this time round because the nature of the shock to the system. All in all it means that the consumer is up against it and if the recent bounce in house prices and activity stalls, their contribution will most likely be muted making the overall recovery that much more difficult.

Dollar depreciation continues this morning with the yen making ground and the Aussie dollar hitting a new high this morning. Sterling suffered further losses yesterday after the weaker than expected CPI data, but made some of those losses back against the euro and dollar. Currently sterling is some 80 points off its lows against the euro with GBP/EUR around 1.0715, but few are betting against the trend. The daily chart recorded hammer yesterday which is considered to be a bullish signal in a downtrend, however the momentum is truly sterling negative and so anyone going long of sterling at these levels will most likely keep a tight stop loss.

Dollar weakness means gold strength this morning and the very small bout of profit taking we saw yesterday has converted into further buying with gold at $1068.5 at the time of writing having already hit a new all time high of 1071.0 in early trade.

Oil is also on the bid and whilst the major uptrend line was broken to the downside in September, it offered some resistance around the $70-$71 mark but now were through that and back above $73. Inventory data this week will be keenly watched and bulls are mostly likely to pounce on any indication of dwindling supplies.