A bumper start to trading
European stock markets surged on Tuesday, with indices across the continent up almost 3% as sentiment surveys for the region significantly exceeded expectations.
The ZEW economic sentiment surveys were very encouraging and suggest the euro area economy is bouncing back quite well following the lockdown. Obviously it’s worth noting that we are starting to see resurgent in cases in parts of Europe which may quickly damage this new-found confidence. These numbers are volatile at the best of times.
Wall Street is eyeing new record highs again this week, with futures up around 1% as President Trump ponders a capital gains tax cut. I’m not entirely sure that’s what the economy needs right now, or the public purse for that matter, but with Trump going into the election on the back foot as a result of the pandemic, rising record stock markets are one thing he has going for him.
Cracks appearing in UK labour market
The UK labour market figures this morning showed cracks appearing in the jobs market as the furlough scheme starts to be wound down. A huge drop in the number of those employed is just the beginning. The unemployment rate looks healthy at 3.9% but that’s widely expected to almost double after the furlough scheme draws to a close. The scheme currently covers almost 10 million people so there’s huge scope for a massive unemployment increase between now and the end of the year.
Oil pushing higher ahead of inventory data
Oil prices are creeping higher again today, pushing the upper end of their recent ranges as the dollar pares some of its recent gains. Underlying sentiment in the markets, supported by the ZEW surveys this morning, are doing the oil prices now harm. The inventory data from API later will be one to watch, with another large drawdown potentially delivering fresh highs as it looks to break free of the summer shackles.
Gold sails through $2,000 as profit taking kicks in
Gold is taking a bit of a beating today, despite the dollar also giving up some of its recent gains. The test and collapse of $2,000 support has likely seen some profit taking kick in following the yellow metals strong performance in July. The next test at $1,980 is giving gold some reprieve but with $2,000 caving so easily, I can’t imagine it will hold too much longer. None of this changes my view longer term, with gold continuing to look bullish but markets don’t move in a straight line and these corrective moves can be sharp but are generally healthy.
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