European open – Trade war, NFP, Brexit, gold, oil

Markets flat ahead of jobs report

It’s all looking a little flat as we head into the European open on Friday, as positive trade developments quickly fade and traders await the US jobs data.

Source – Thomson Reuters Eikon

Investors were quite clearly buoyed on Thursday by a phone call between the US and China that appeared to lay the foundations for an early October meeting in Washington. Whether the meeting actually takes place or resolves anything is anyone’s guess but investors are clinging to any hope of bringing this trade war to an end.

Data from the US on Thursday further lifted sentiment, as ADP reported strong jobs growth last month and the ISM survey suggested all is rosy for the bulk of the economy. Of course, we are seeing pockets of weakness appearing but the most important part of the economy remains in good health.

Of course, if the jobs data starts to disappoint then sentiment may quickly change but there was nothing in the data we had on Thursday that suggests it will just yet. The ADP report may have lifted expectations for today’s NFP a little, while unemployment is expected to remain at 3.7% with earnings up a solid 3.1%. Not that any of this will stop the Fed cutting this month as markets have backed them into a corner and forced their will.

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Has this week really gone so badly for Boris?

This week has been everything we expected and more in Parliament, as PM Boris Johnson found himself of the losing side of countless votes but retains hope of securing the election he craves. He started the week claiming he doesn’t want an election, unfortunately this was just as transparent as claims that the prorogation was just normal procedure ahead of the Queen’s speech, rather than a cynical attempt to frustrate and evade Parliament.

Some suggest the PM is now out of options as the opposition refuse to give him what he wants. The reality is that an election looks inevitable and all of this week’s theatrics are simply intended to feed the narrative of Parliament overriding the will of the people, and further delays will not help when that election comes. Sterling may be buoyed by this week’s events but it may be less impressed if Boris’ plan starts to come together.

Gold correction underway?

Gold bulls may finally be throwing in the towel following numerous failed attempts to break historic resistance and take the yellow metal back to a region it spent two years in earlier this decade. Buoyed by trade developments, investors moved away from safe haven’s and scuppered gold’s push just as it was taking another run at $1,560.

The yellow metal has fallen 3% from Thursday’s peak and below $1,520 which had been providing some support. It continues to hold above $1,500 but in reality, the key level below is $1,480. A break of this may signal a much larger correction, one which could be argued to be overdue given the size of the rally we’ve seen since the start of summer.

Brent stumbles at range highs

Oil has had a rather enjoyable second half of the week. Lifted by improved risk-appetite on the back of trade talks and an unexpected inventory drawdown on Thursday, Brent has surged from its range lows – around $58 – to test the range highs around $61-62. It has stumbled at the highs again though but if it can break above here, it could be a very bullish shift in oil after what has been a rough few months.

Economic Calendar

For a look at all of today’s economic events, check out our economic calendar.

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