20130906

Good morning,

Equity markets enjoyed another good session with EU and US in positive across the board. For the Asian indices, all but the Nikkei (down 1.45% to 13,861) posted gains. Bonds sold off as investors re-allocated to equities and supported the US Dollar with EUR/USD falling like a rock closing below the 100-day SMA following ECB's comments after the rate announcement.

From Europe, the interest rates in the Euro zone and the UK were both kept unchanged at 0.5% as expected. German Factory Orders came out lower than expected, but given the positive momentum in the IFO and ZEW indices, we could see a pickup going forward. 5- and 10-year bond auctions in Spain produced lower rates than prior indicating that the market is starting to demand a lower risk premium for holding Spanish government papers, which is a good sign. However, the same pattern did not show in the 10-year French bond auction, where the rate was 2.57% against 2.52% prior. After closing above the 50-day SMA on Wednesday, EUR/USD took out that level as well as the 200- and 100-day SMA, testing the 1.3110-level

In the UK, besides the interest rates, the asset purchases were also kept unchanged at £375B. GBP-pairs were initially supported with Cable taking out recent highs, testing trend resistance from February 2013, but ended in negative selling off for the first day during this week. The MPC disappointing the market a tad in not disclosing a potential timing of hiking rates. EUR/GBP continues to fall and is closing in on the April-bottom formation with key support just below the 0.84-figure.

From the US, Factory Orders for July came out a tad better than expected despite being in negative and Jobless Claims came out in positive (4wk MA below 330k for the first time since July 2007). ISM Non-Manufacturing surprised to the upside with a figure at 58.6 vs. 55 expected as a result of a general improvement.

Today, we have the Industrial Production figures from Germany and the UK, but the key event for today will be the US August Job Report, where focus will be on the development in the Nonfarm Payrolls. Consensus in the market is at 180K vs. 162K prior, so pretty close to the ADP release from yesterday. The Unemployment Rate is expected to be unchanged at 7.4%, but a change in the participation rate could have an impact.

The NFP-figure is always the key and we expect a relatively quiet market ahead of the release at 12:30GMT.

Have a nice weekend.