Investor appetite for risk and hunger for outperformance is being nourished by the usual suspects of Banks/Financials and raw-material sensitive Miners topping the UK 100 this morning, accompanied by continued rebound by those Brexit-battered Housebuilders. This after Friday’s US jobs report saw stateside bourses push on towards all-time highs (the S&P500 within a whisker) as investors take the data as implying May’s plunge was nothing to worry about in terms of economic/jobs market weakness, while June’s rebound is nothing to worry about either in terms of accelerating Fed policy normalisation.

On the positive side May’s weakness (11K, revised down) does indeed look to have been an aberration. June’s rebound (287K) also merely levels out the two months to 150K each, a level we have become accustomed to seeing on the first Friday of the month. And markets like the fact that this probably doesn’t mean a Fed rate hike is lurking round the corner. Yay, low rates for longer! Good for risk appetite and equities in a world where fixed return returns are depressed to say the least.

In aggregate, the jobs report merely reinforces steady economic recovery which will warrant US rate rises in time. But not just yet. Not with external headwinds and Brexit uncertainty in play. And especially not with the BoE set to turn up the stimulus dial this week after several years of inaction, potentially sending the GBP lower and delivering reciprocal USD strength that indirectly and effectively tightens US policy, thus reducing the need for the Fed to move again. Steady as she goes for the accommodative monetary policy ship. Markets ever thankful.

Mike van Dulken, Head of Research, 11 July