- Most European markets will open higher this morning, although the FTSE 100 lags behind.
- Optimism is spreading from the US, where an accelerated vaccination programme, new stimulus and better-than-expected economic data is providing support.
- EU regulators are to investigate the retail trading frenzy that also has US authorities worried.
- The headline event in the economic calendar today is US non-farm payrolls, which will bring the dollar and currency pairs like CAD/USD, EUR/USD and GBP/USD into focus.
- In commodities, oil has continued to climb to fresh highs on the back of the rosier outlook for a global economic recovery this year.
FTSE 100 struggles to find higher ground
The FTSE 100 is set to open slightly lower today at 6502.5 from 6507.3 at the end of play yesterday.
European markets to open higher
France’s CAC 40 is to open 0.2% higher at 5629.5 from 5617.3 at the end of play yesterday.
Germany’s DAX is called to open 0.1% higher at 14084.0 from 14067.5 at the last close.
US markets close at record highs
European markets are largely following US and Asian markets, which both headed higher overnight on the back of positive sentiment growing in the US. The S&P 500 and Nasdaq 100 both closed at record highs, as optimism grew about the country’s economic recovery prospects. The Dow Jones closed a smidgen below an all-time high.
Democrats are inching closer to passing a new $1.9 stimulus bill, supported by the continued support being provided by the Federal Reserve. Plus, the country’s vaccination programme will be accelerated by the extra funding, with president Joe Biden still aiming to vaccinate 100 million Americans in his first 100 days in office.
US jobs data this week was positive, showing private payrolls increased by 174,000 last month. That was well ahead of the 49,000 additions expected by analysts, according to a poll by Reuters. Plus, the 123,000 fall reported in December was revised to just a 78,000 decline.
Earnings have also continued to surprise this week, providing a boost to markets.
Attention now shifts to non-farm payrolls at 1330 GMT today. Forex.com’s head of research Matt Weller has a look at what to expect from US non-farm payrolls today.
EU regulators join the US over concern about retail trading frenzy
The European Securities and Markets Authority has said it is considering intervening as a surge of interest from social media-driven retail traders continues to cause volatile and wild price movements in the markets, echoing concerns voiced by authorities in the US.
Regulators are now looking into the frenzy, which started in the US and has quickly spread to Asia and Europe, to find out what precisely caused the surge in trading over recent weeks. Data suggests trading by retail investors in French blue-chip stocks rose fourfold last month while overall volumes tripled.
‘We are closely monitoring these new developments and are assessing whether any further supervisory actions are needed,’ said the chair of the European regulator Steven Maijoor.
That comes as US regulators discuss the impact of the surge in interest from retail traders, with Treasury secretary Janet Yellen stating there was a need to ‘understand deeply’ what has happened and why. US authorities are now thought to be trailing online forums to see if there is any evidence of foul play.
UK to introduce quarantine hotels on February 15
The UK has decided to introduce new rules that will force travellers coming from coronavirus hotspots, such as South America or South Africa, to quarantine in a hotel from February 15. The quarantine will be mandatory and last for 10 days.
The idea has been in discussion for some time, sparking criticism that the government has acted too slowly considering the policy is being introduced almost a year after the pandemic erupted. UK health secretary Matt Hancock has spoken to his counterpart in Australia, which has had a similar policy in place for some time.
Activity is now focusing on securing the facilities needed for the policy to work before being formally introduced later this month.
Barclays CEO: London needs to compete against Asia and US, not the EU
The chief executive of Barclays, Jes Staley, has said the City of London’s financial services sector should focus on competing with hubs in the US and Asia rather the EU, he told the BBC.
The CEO conceded that some new jobs that would have been created in the UK has been lost to the EU because of Brexit, but said the divorce allows the country to define its own agenda.
‘I think Brexit is more than likely on the positive side than on the negative side,’ Staley said. ‘What the UK needs and London needs, is to make sure that the city is one of the best places, whether it was regulation or law or language, or talent that manages these flows of capital well, and I've said, in other cases, I think what London needs to be focused on is not Frankfurt or not, Paris, needs to be focused on New York and Singapore’.
Draghi begins talks to form new Italian government
Mario Draghi, the former boss of the European Central Bank, initiated talks yesterday with politicians from various parties about forming a new government.
Focus is on 5-Star, the largest party in the parliament, as it softened its hostility toward working with Draghi. One of the party’s senior politicians, Luigi Di Maio, said 5-Star had a ‘duty to meet’ with Draghi and to ‘listen and then take a position’.
The entry of Draghi onto the political stage has been widely welcomed as Italians hope he can steer the country through the pandemic and economic recovery, whilst forming a government would also avoid early elections being held.
Draghi is expected to evaluate the state of play over the weekend and whether there is enough support to form a new coalition government.
Forex: Dollar in focus ahead of non-farm payrolls
The positive sentiment building around prospects for the US economic recovery this year has supported the dollar, while sterling has also continued to perform well as its vaccination programme pulls ahead of most other countries. Meanwhile, the euro continues to struggle as its vaccination programme struggles to pick up speed.
EUR/GBP was down 0.1% in early trade at 0.87457 – its lowest level since May 2020 – from 0.87521 at the end of play yesterday.
EUR/USD was trading slightly lower this morning at 1.19642 from 1.19640 at the end of play yesterday, which marked its lowest level in over two months.
Analyst Fiona Cincotta looks at the price action of EUR/USD ahead of the NFP report here
GBP/USD was broadly flat at 1.36815 from 1.36716 when markets closed yesterday.
Meanwhile, USD/CAD will be in focus today, with both the US and Canada to release jobs data at 1330 GMT.
Commodities: Oil continues to push higher
Oil prices continue to find higher ground thanks to OPEC+ agreeing to extend supply cuts this year, continued declines in oil stockpiles, and a rosier economic outlook as government’s continue to provide financial support while vaccines are rolled-out.
Brent trades at $59.11 a barrel this morning – setting a new high – from $59.00 when markets closed yesterday, while WTI followed higher to $56.52 from $56.41. Brent now sits at its highest level since February 2020, while WTI is at its highest level since January 2020.
The Baker Hughes oil rig count, which provides an insight into how busy drilling activity is in the US, will be released at 1800 GMT.
Gold traded at $1797 an ounce this morning, up 0.2% from $1794 at the close yesterday.
Silver was trading slightly higher at $26.39 an ounce from $26.35 yesterday.
Market-moving events in the economic calendar
The economic calendar is light this morning activity picks up this afternoon. The headline event today is US nonfarm payrolls published at 1330 GMT, alongside the unemployment rate and average earnings. You can read our comprehensive guide to non-farm payrolls here.
The Bank of England’s governor Andrew Bailey will make a speech at 1330 GMT. That will be at the same time as a slew of data comes out of Canada, including unemployment, average hourly wages and the Ivey PMI.