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Daily Wrap Up 11 October 2021

11 Oct 2021 03:51 PM

Mood subdued amid low volatility

The mood in the markets is subdued following the excitement experienced last week. Traders are sitting on the sidelines today as they still don’t know what to make of last Friday’s US jobs report. The headline non-farm payrolls reading was very disappointing, because only 194,000 jobs were created last month, and that was an enormous miss on the 500,000 that economists were expecting. At the same time, the unemployment rate fell from 5.2% to 4.8% - the lowest mark since the start of the pandemic. In the week that proceeded the jobs report, there was growing speculation the Fed might look to begin tapering its bond buying scheme in the next few months, possibly in January, but the latest employment data muddied the water, hence why volatility is low across the board today. The US government bond market remains closed as the country is celebrating Columbus Day and to a certain extent, that is also playing into the dreary session. The FTSE 100 is once again outstripping the DAX 40 and the CAC 40. BP and Royal Dutch Shell are showing strong gains thanks to the rally in oil, so that has given a nice lift to the UK equity benchmark. The S&P 500 and the Dow Jones are both up 0.5%.

The US dollar is trading in a tight range today. On the run up to last Friday’s non-farm payrolls update, the greenback enjoyed a rally, but in light of the labour data, it took a knock, and today’s move has been downbeat. It says a lot about the currency that it is still holding up relatively well in light of the jobs report. Even if the rate of job creation in the US is slowing down, the Fed seem to be further down the track to tapering than the Bank of England or the European Central Bank, so that is why the dollar is still relatively strong.

Gold saw a surge in volatility in the wake of the jobs data, but it had a quiet finish to Friday’s session and the price action has been uneventful today too. Lately, the metal has been rangebound and it feels like it is heavily dependent on the dollar for its cues. When the US bond market reopens, it is likely we will see gold move in a clearer direction. WTI is trading above $80 - first time since October 2014. The energy market is still driving higher because of supply concerns.

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