Markets Higher as US Non Farm Payrolls Lift Sentiment; FTSE Pushes Through Hourly Resistance

Risk sentiment continued higher during the Asian session as markets operate under the assumption that Eurozone Finance Ministers will overcome regional political obstacles and ensure the next tranche of Greek bailout funds will actually be paid out. Analysts have also started to price in better growth expectations, following the moderately encouraging US Non Farm Payrolls number that was released on Friday. The latest meeting between the German Chancellor (Merkel) and the President of France (Sarkozy) came on Sunday and the main topic was bank recapitalization strategies in the context of the wider European debt issue. Most of the rhetoric was little changed from previous comments, but this was viewed as positive as there was no indication of a political stalemate between the two countries. This is positive for both the Euro currency and equity markets as a whole. We will see a G20 meeting at the end of this month, so it will be interesting to see if there are any policy changes before this occurs. On Friday, the US Non Farm Payrolls surprised markets but the unemployment rate held at 9.1%. As long as the labor market looks this way, the Federal Reserve is highly unlikely to make any comments suggesting a rise in interest rates. Also on Friday, Fitch downgraded both Italy (to A+, down one level) and Spain (to AA-, down 2 levels), with both outlooks negative but the market reaction was limited as there was not a consensus move by all three ratings agencies (S and P left their rating unchanged). In corporate headlines, Dexia agreed on a bailout plan from the governments in France and Belgium as a means for avoiding bankruptcy. The EUR/USD is trading back at the highs near 1.3340-1.3470 while the USD/JPY ticks lower at 76.60-76.90. Equity futures in the US are higher, with the S and P 500 up more than 1% at time of writing. Over the weekend, a Bank of England MPC member released a statement expressing support the central bank's recent decision to inject another round of quantitative easing stimulus. This gives markets some idea of what the BoE is thinking at the moment but a fuller understanding will come when the policy minutes from the last meeting are released on October 19th. The comments, though, were significant because the MPC member was one of the last hawkish holdouts (until the end of last summer).