Stocks subdued, gold loses its shine
European stock markets are mixed as traders lock in some profits that were achieved last week. There was a reasonably lacklustre session in Asia overnight and that set the tone for Europe. It has been a quiet day in terms of economic indicators so that has left traders unenthused. Indices are only showing modest losses as the economic recovery story is still in play. Last week, the manufacturing and services reports from the major economics of Europe showed the region is still enjoying a rebound.
US stocks are a touch lower following on from the record high that was set by the Dow Jones on Friday. At the end of last week, the US posted impressive jobs data, which underlines the rebound in the economy but at the same time, it led to increased speculation the Fed might bring forward the tapering of their bond buying scheme. Today’s JOLTS job opening report jumped to a record high of 10.07 million, which underlines the strength of the labour market. It is likely that talk of tapering the stimulus package will increase, should the US keep posting solid data. Some people are predicting there will be a taper tantrum, but the Fed will probably lay the groundwork carefully in an effort to avoid such a situation.
On Friday, the US dollar jumped following the release of the jobs report. The unemployment rate fell to its lowest mark since the pandemic began so that gave dealers a reason to snap up the dollar. Volatility has been low in the currency market today and the greenback has moved fractionally higher again. EUR/USD fell to its lowest mark since early April as it is clear the US is further along in the monetary tightening race than the European Central Bank.
Gold endured a painful plunge overnight as it is understood the relatively low levels of liquidity led the market to fall to its lowest mark since late March. The asset has pulled back a large portion of the ground that it lost overnight but it remains below the lows of last week. In the wake of last Friday’s US non-farms payroll report, the US dollar pushed higher as the strong report sparked talk the Federal Reserve will look to taper its bond buying scheme sooner than anticipated, hence the weakness in gold.
China has introduced tighter restrictions to curb the spread of Covid-19 cases, this has prompted traders to sell oil. Manufacturing in China was already slowing down in advance of the latest rise in Covid-19 cases so extra pressure has been applied to WTI and Brent crude.