A quiet start to the day saw the majority of European equity indices open lower on thin trading as markets took a pause ahead of key data. London’s blue chip index traded 0.6% in early morning trade while the DAX and CAC indices also experienced a brief selloff. Markets managed to shore up throughout the day as optimistic investors positioned themselves ahead of US non-farm payrolls and unemployment data. However, European markets slid lower as attention shifted back towards underlying geopolitical risk.
Despite the unemployment rate in the US rising to 6.7% in January against the expectation of 6.6%, 46,000 new positions were added in non-farm payrolls throughout February, data which helped push the S&P 500 to a fresh all time high as market participants were encouraged by the improving labour market and demand outlook. After the recent cold snap, which could explain the slight increase in the unemployment rate, bullish undertones in the US market have propelled both the DJIA and S&P 500 higher early on, but the rally seems to have been cut short as traders remain cautious and struggle to justify current market valuations.
Three month LME copper prices smashed through near term support levels, dropping 3.5% towards $6,800/tonne as the default from China’s Chaori Solar fuelled concerns that further defaults could be triggered with rising debt impacting demand from the world’s top consumer. Market participants are concerned that the recent Renminbi devaluation and unwillingness of Beijing to swoop in and bailout the affected investors will trigger a domino effect which will test traders using the metal as collateral for financing deals.