ECB in view, although hold looks likely

The FTSE 100 has outperformed its mainland European counterparts in early trade today, with energy names leading the way thanks to a fresh surge in crude prices seen yesterday. The latest jobs report saw the UK economy back in focus, with traders continuing to weigh up the chance of an August rate cut despite the stubbornly high core inflation reading seen yesterday. While some will be celebrating the average earnings decline that took the total wage figure down to 5.7%, that remains within the 5.6-5.8% range that has dominated the past six-months. Arguably it is the claimant count figure which provides grounds for concern at the BoE, with the latest figure of 32.3k coming in as the second highest in over a year. That is second only to last month’s reading of 51.9k (a three-year high).

Global semiconductors have been dealt a blow after reports that Joe Biden could implement fresh restrictions on companies selling chips to China. That comes off the back of Trump comments that saw the prospective President outline a policy that cast Taiwan aside as a priority, warning that American protection should come at a cost. This looks likely to herald a new phase protectionism from the US, with Biden clearly wanting to show his teeth at a time when Trump has shown his hand as a leader that takes a ‘America First’ approach. The prospect of a protectionist policy shift from Trump has helped boost demand for US manufacturers and industrial names, with investors shifting focus towards some of those unloved pro-cyclical names over the past week.

Looking ahead, today sees the ECB come into the limelight, with markets hoping to see Christine Lagarde lay the groundwork for a September rate cut. Coming hot off the heels of yesterday’s final CPI readings which saw headline inflation confirmed at 2.5%, it looks likely that the bank will hold off and gear up for a super September that currently looks in line to see the ECB, BoE, and Federal Reserve all cut rates. With that in mind, today is most likely going to be dominated by the tone of Lagarde, although traders will likely eye up the August Jackson Hole meeting as the potential event for the central bankers to set out their stall.