Our head of markets discusses reaction to US jobs data, Brexit talks, Covid vaccines and retail sales.
Dismal US employment numbers were received positively by the markets, as investors perceived the likelihood of a fiscal stimulus package to have improved significantly.
A reading of 245,000 jobs added was far short of the 470,000 expected, and sharply down from the previous figure of 638,000. At the same time – and this is often seen in times of economic stress – the unemployment rate fell further, not due to improving conditions but due to fewer disheartened citizens now looking for work, thus outside of the numbers measured.
Speculation that there could be a bipartisan agreement of an immediate $900 billion stimulus package to restrict further economic damage propelled markets towards new record highs.
Coupled with investor enthusiasm on the Covid-19 vaccine providing light at the end of the tunnel, the Dow Jones is now ahead by 5.9% in the year to date, the S&P 500 14.5% and the Nasdaq 39%.
Asian markets slipped slightly as fears resurfaced that there could be some US sanctions on certain Chinese officials on political grounds. This would be seen as something of a parting shot from the outgoing President.
For the UK, a reportedly tense weekend of talks heightened uncertainty as Brexit negotiations reach a climax. Sterling came under some pressure as previous optimism on a deal evaporated to some extent, with the outcome remaining unclear, undecided and with time quickly running out.
Meanwhile, a weekend of understandably and markedly lower footfall was reported as the number of shoppers reduced from the same time last year ahead of the final few Christmas shopping weeks. The shift to online is likely to have picked up much of this slack, and the trading updates from the retailers early in the New Year will provide a clear picture of general festive activity.
In the meantime, the FTSE 100 is seeing some continued benefit from the vaccine boost to optimism which led to a strong November. There remains some way to go to recover lost ground, with the index remaining down by 13% in the year to date, but the more recent momentum is nonetheless a positive change from the relentless difficulties endured earlier in the year.
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