A quiet session last night as far as the markets were concerned and this has followed through to this morning. The FTSE is drifting sideways after yesterday’s decent rally and we tentatively sit just above the 5300 level. Bulls are wary of the resistance just above here after the market rejected the 5380 area twice last month, so for now the fence sitting will most likely continue, especially since economic data is thin on the ground today.
There’s a feeling that we’re building up to a crescendo at the end of this week when the US non farm payroll numbers are released and that number could easily determine whether we end the year with the usual Christmas rally or if the resistance levels prove too strong and we finish on a damp note.
But until then we do get a preview of how that employment number might come out with the ADP jobless data at 13h15 London time. This number has been getting lower each month since March and the trend looks set to continue as initial jobless numbers are now at their lowest level for over a year. Later on the Federal Reserve’s Beige Book comes out at 19h00, which is expected to a continuation of the modest improvements in various sectors. It’s a bit of a confidence barometer and can sometimes cause the market to move, so pay attention later on this evening.
Mining stocks are making modest gains this morning after Goldman Sachs raised their recommendation on Vedanta from neutral to buy, so once again the risky assets are attracting buyers. Meanwhile the banks are trying their best to drag us lower. UK PMI construction numbers just released have shown an improvement to 47.0 up from 46.2 and better than the expected 46.9, albeit still below the 50 level which means contraction. Once again this shows a glimmer of hope, but the FTSE has hardly battered an eyelid.
The appetite for risk continues to look good for gold which has burst through the 1200 level to new dizzy heights. As it turns out the Dubai correction presented a massive buying opportunity, but it does show how the markets are prone to sharp declines that could shake out many bulls and compound moves to the downside. That’s the risk of getting it at these levels. Whilst the upside returns could be fantastic, investors must have the stomach for possible shocks to the downside which could be as much as 5% in a couple of hours, just as we saw last Friday.
Gold’s move higher comes despite mixed fortunes for the dollar this morning which on the whole is stronger against other currencies, but only just and the dollar index is hovering over its lows around the 74.200 mark.
USD/JPY has bounced strongly off the 85.00 mark in anticipation of a possible intervention by the Japanese Central Bank but one can’t help think that this is more of a bear short term squeeze before then next leg down for the dollar. Currently at 87.30 resistance is at 87.50 and then 88.30 with support seen around 86.55 and 86.15.
Oil is a little undecided this morning and really has dropped below the radar over the last few weeks as it continues to sit below the $80 mark and stand in the shadow of gold. Inventory numbers later though might provide some source of entertainment, but judging but the most recent action, it may be a muted response once again.