Market sentiment improved after a hiccough, and this was reflected in metal prices, which were only slightly lower on the week.
8.3% - unemployment rate in the US for July, which is creeping up
The meeting of the European Central Bank’s governing council disappointed after president Mario Draghi’s earlier categorical support for the euro. But analysts soon started pointing to the political hurdles that the Draghi must overcome, and the markets were contented with his now more conditional promises to buy distressed sovereign bonds and so on.
Earlier this week, Italian 10-year bonds were trading with yields of 5.89% while Spanish equivalents were at 6.56%, both below the 7% level considered to be dangerous. Spain was benefitting from suggestions that the country may finally accept a formal rescue, despite the blow to its pride.
Just as importantly for sentiment, US jobs data turned out better than expected. The US economy created some 163,000 jobs in July, significantly more than the 100,000 the markets had been hoping for and well ahead of the 80,000 that it had created in June. But the unemployment rate for the US has crept up to 8.3% in July from 8.2% in June, suggesting that the economy has not yet turned the corner.
Last week’s meeting of the Federal Open Market Committee, the US central bank’s principal policy-making body, took a relatively bearish view of the economy but did not signal any concrete action, which disappointed some traders.
The purchasing mangers’ index (PMI) for manufacturing published by the Institute for Supply Management (ISM) in the US was also disappointing. It came in at 49.8 in July, a slight improvement from 49.7 in June, but below market expectations of 50.2. This meant that the manufacturing sector was contracting for the second month running, even as the ISM’s data showed the US economy as a whole growing for the 38th consecutive month.
Manufacturing is particularly important for the metal markets, so they will be watching the data for industrial production in China, due shortly. The official PMI for Chinese manufacturing in July, published last week, was a disappointing 50.1, below expectations of 50.5 and down from the 50.2 seen a month earlier.