TODAY’S FAYRE – Sunday, 6th September 2015
“The earth seems dead; the crusted snow
Is like the marble on a tomb:
Cold, ice-clad trees, like skeletons,
Cast fitful shadows o’er the gloom.
From swaying branches weird winds strip
The frozen tears that hang on them;
And wailing voices rise and fall In sad and solemn requiem.
The East wind, harnessed to a cloud,
Swept o’er the dismal earth to-night;
And, rushing by the half-lit moon,
With rude, rough blast put out her light.
The hungry wolf howls to the blast,
And, restless, scents each thing astir;
Oh ye, who pray at home to-night,
Pray for the poor, lost traveller!”
Edward Hopper – poet – 1882-1967
Yesterday we were all Non-Farm payroll watch, with a cameo-supporting supporting performance from Mario Draghi, trotting out his overly-used and very familiar comments about using the full arsenal of weapons to fight deflation and stimulating growth – barnstorming rhetoric! The markets lapped it up sending European stocks sharply up. The Street of Dreams was far from convinced resulting in the DOW and the FED remaining just a smidgen above the Plimsoll line and the NASDAQ falling below it. I suppose there was an element of a ‘Labor Day’ syndrome about the session, with no one wanting to be caught off-side ahead of a four day weekend and post the payroll data blues. Regardless of the dismissive attitude adopted by many politicians and Central banks towards the threat that global economic activity may not be quite as robust as they think, with Australia, Argentina, Italy, France and Japan not far away from joining Brazil and Canada in a vortex recession, watching their dole queues lengthen.
Today’s headline number for the most anticipated US Non-Farm Payroll data in living memory of 173K certainly did not deter the market hawks from believing a 25 basis point hike on 16th September was still very much on the FED’S agenda. Wall Street’s futures opened sharply down with the DOW surrendering 1.5%, the S&P 500 1% and the NASDAQ 0.8% at 3.00pm BST. In the past quarter, an average of 211k jobs have been created on a monthly basis including adjustments and the unemployment rate has fallen from 5.3% to 5.1%. The June job creation was adjusted upwards to 245k from 231k. 140k jobs were created in the private sector in August.
Falling global growth, particularly in China and benign inflation and the threat of recession in many countries will weigh heavily on Chairman’s Yellen’s mind. However the FED is conveying the impression it has to start somewhere, sooner rather than later and further procrastination could be very damaging to global sentiment. BOE Governor Mark Carney’s MPC’s thoughts seem to be in synch with the FED and the market expects a symbolic 25 basis point base rate rise in April 2016, unless the world’s economy falls out of bed in the meantime. The UK economy remains robust – a veritable beacon for the EU! Personally thinking I believe a US rate hike in September and or one in the UK in early 2016 would be very misguided. It won’t take much to tip the whole world back in to recession if the cost of money goes up, thus increasing the value of the Dollar and Sterling, thus putting the rest of the world under the financial cosh unnecessarily. At 3.00pm the FTSE was down 132 points at 6061. The DAX was down 2.6% and the CAC by 2.7%
David Buik – market commentator
Panmure Gordon & Co