Market declines as momentum from US jobs data ebbs

Miners and some financials are standing out on Europe’s main equity markets, limiting an overall decline, as the momentum on world stock markets from Friday’s US jobs data ebbs. The dollar is up against the euro and sterling, while the S&P 500 in New York is remaining shy of setting a fresh record.

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A selection of European financial stocks are holding firm after a rally for their US peers on Friday, which came after US president Donald Trump and National Economic Council chairman Gary Cohn flagged a review of the Dodd-Frank legislation, the landmark financial reform law introduced in 2010 that includes prohibitions on banks trading for their own benefit.

Heavyweight banking stocks have been able to make gains. Barclays and Lloyds Banking Group are both up 0.5 per cent.

Equities

London’s FTSE 100 is slipping 0.1 per cent, helped by support from its large resource sector. The region-wide Euro Stoxx 600 is down 0.5 per cent. Consumer and energy stocks are exerting the biggest drag at sector level.

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Mining stocks are providing the most significant support after strong annual profit numbers from Randgold Resources, the best single gainer on the main London index with a 4 per cent rally. Commodities trader Glencore is up 1 per cent. The sub-index tracking Europe's resource sector is up 0.2 per cent overall.

The Xetra Dax 30, which lacks resource stocks, is down 0.8 per cent and is failing to get any lift at from unexpectedly strong factory orders data for December. Its big exporters are dominating the downside, with Volkswagen and Continental the biggest fallers, down by about 2 per cent each.

The S&P 500 was down 0.1 per cent in early trade, unable to set a fresh record. The broad Wall Street benchmark gained 0.7 per cent on Friday in New York to close less than 1 point away from its record high set last month, after data showed the US economy added 227,000 jobs in January – exceeding forecasts.

However, the unemployment rate ticked up 0.1 percentage point to 4.8 per cent, against expectations it would remain unchanged. It is expected to fall 0.3 per cent, as earlier predictions of an opening rise fade.

Although the non-farm payrolls report was solid, many economists took the view it was unlikely to shift the Federal Reserve from its wait-and-see mode in the near term. The US central bank last Wednesday kept interest rates on hold, after raising them for the first time in a year in December.

The mood was stronger in Asia, where investors got their first chance to reposition after Friday's US jobs data. Japan's broad Topix rose 0.4 per cent as a weaker yen gave exporters a lift, while Hong Kong's Hang Seng advanced 1 per cent. On the mainland, China's Shanghai Composite added 0.6 per cent.

Fixed income

The yield on France’s benchmark 10-year sovereign bond is up 4 basis points to 1.12 per cent, as investors cut their exposure to the debt amid growing uncertainty ahead of the country’s general election.

François Fillon, once seen as the favourite centre-right candidate, faces mounting pressure to stand down over accusations that his family received public money for work they did not do. Meanwhile, Marine Le Pen, the far-right, anti-EU contender laid out her campaign over the weekend, adding to the sense of unease.

The rise in yield, which comes as investors sell the debt, contrasted with a fall in yields for German and UK 10-year paper, down 3bp to 0.39 per cent and 2bp to 1.34 per cent respectively. US 10-year borrowing costs are down 4bp at 2.45 per cent.

The spread between French and German 10-year yields is hovering around its widest for three years.

Forex

The US dollar is rising against its main European rivals, with the euro down 0.5 per cent at $1.0726 and the pound 0.4 per cent weaker at $1.2436.

The US dollar index is recovering from a modest fall during Asian trade to rise 0.3 per cent to 100.19.

The yen is up 0.2 per cent at ¥112.51 per dollar, helped by demand for haven assets, including gold and US government debt.

Commodities

Gold is 0.6 per cent firmer at $1,226.80 an ounce.

Oil prices are lower with Brent crude, the international benchmark, down 0.4 per cent at $56.56 a barrel and West Texas Intermediate off by 0.3 per cent at $53.65.

– (Copyright The Financial Times Limited 2017)