US markets have continued their grind higher this week with the S&P500 eking out gains on all four trading sessions so far.
Across the globe, though, the strength in other equity markets has been less marked: In the Euro zone most equity markets have traded sideways or even lower over the course of June; in the UK both the FTSE 100 large caps and the FTSE250 mid-caps have trended sideways since mid-May; while in Asia most equity markets have been slowly moving lower since earlier this year. The Japanese Nikkei 225, for example, peaked in February; the South Korean Kospi is essentially unchanged relative to its January high; while the Chinese Shanghai Composite peaked in February just after Chinese Lunar new year.
Globally, therefore, risk appetite has been deteriorating whilst the S&P500 (amongst a select few other equity indices) has been making new highs. Divergence in global risk appetite often precedes major pullbacks. In that respect the message of our market timing models is of note, and troubling for the short term bulls.
Key events today include the monthly non-farm payroll data in the US. This is published at 1:30pm UK time. The monthly job gains, wage inflation, unemployment rate and participation rate will all be closely watched. Consensus is for 700k net new jobs, although in recent months the actual outcome has often been notably different from expectations. The dollar will also be watched closely today, especially around that data release. Of late, it has started to strengthen once again (and with that the GB£, Euro and other currencies have been weakening).