European stock markets are trading mostly higher on Friday, with sentiment was rather cautious ahead of NFP jobs data. Also, political uncertainty in the U.S. and Hong Kong, geopolitical tensions in the Middle East, and Brexit tensions continue to unnerve market participants. In Europe, European Council President Donald Tusk has said he is open but not convinced by British Prime Minister Boris Johnson’s proposals for a Brexit deal. As a reminder, the U.K. is scheduled to leave the bloc at the end of the month.
Against this backdrop, UK’s FTSE 100 adds 0.59 per cent to 7098, Italy’s FTSE MIB gains 0.53 per cent to 21,423, France’s CAC 40 edges higher by 0.21 per cent to 5,450, and German DAX 30 gains 0.03% to 11,929. US stocks index futures indicated a mildly lower open earlier, and erased the decline after the release of the latest U.S. jobs report.
On the data front, September non-farm payrolls came in at +136K versus +145K expected and +130 in the previous month. Unemployment rate declined to 3.5% versus 3.7% expected. Average hourly earnings rose 2.9% y/y versus +3.2% expected. In a knee-jerk reaction, the greenback rose across the board as the unemployment tare declined strongly and confirmed a healthy state of the country’s labor market. As a result, EURUSD dipped from daily lows around 1.10 and turned marginally negative on the day. GBPUSD slipped to lows around 1.23, and USDJPY recovered to the 107.00 area.
However, the rally could turn out to be a short-lived one, as these mixed numbers are not enough to alter the view that the Federal reserve will cut rates later this month. Besides, the headline jobs number was lower than expected, as well as wages data, which in turn points to weaker consumer demand and lower retail sales down the road.
Brent crude is marginally higher on Friday, with the market derived some support from a weaker dollar. However, the futures are set for decent weekly losses amid concerns over slowing demand which increased following the release of weaker-than-expected U.S. economic data. Earlier this week, the Institute of Supply Management said this week that its non-manufacturing index fell to its lowest level since August 2016 while ISM’s purchasing managers index for manufacturing posted the lowest reading since 2009. Also, traders are nervous ahead of next week's U.S.-China trade talks, which will be important for all asset classes including oil. At the same time, as long as Brent remains below the $60 handle, downside risks prevail.
Nathan Lambert, Head of Global FX Analytical Department