Traders downsize risk ahead of Non Farm Payrolls

<p>European indices lost between 1.8% and 2.8% on Friday morning as traders downsized the amount of risky assets they held in their portfolios ahead of […]</p>

European indices lost between 1.8% and 2.8% on Friday morning as traders downsized the amount of risky assets they held in their portfolios ahead of an expected weak non-farm payroll number this afternoon. It is this risk off move that is forcing the FTSE 100 further from resistance levels, with 90 points lost on the UK Index.

All key heavyweight sectors, the miners, banks and oil firms, were heavily lower in early trade, which is no real surprise considering that when investors look to downsize risk, these are the top three stock sectors on their hit list. All three sectors have lost between 1.8% and 2.5% as a result, with stocks such as Barclays, Lloyds and BP the key drags on the UK Index, falling 4%.

The volumes we are seeing are low too, which also paints a picture of investors unwilling to do much other than minimise risk ahead of the payroll figures.

Non Farm Payrolls the key focus
The key focus for most traders today is this afternoon’s non-farm payrolls, due out at 1.30pm. There is the normal tension amongst investors ahead of the payroll numbers today but considering that the actual figure could have a big bearing on what the Fed do at their September FOMC meeting and the fact that various estimates for payrolls have been downgraded throughout the week, there is a sense of heightened tension in the markets.

At the start of the week, consensus estimates were for a non-farm payroll figure of around +75,000, though some estimates are now more slanted towards the 25,000 mark. Traders should not discount the potential for there to be a negative number either.

If the gauge of US consumer confidence for August is anything to go by, we could be set for quite a bad number indeed. US consumer confidence slumped to a two-year low last month of 44.5, worse than the market had expected, and there is every chance that this may herald a weak jobs market for the month too, with less consumers active.

That said, a weak jobs number may not be met with an overly aggressive negative reaction in the markets as it is likely to add yet more pressure on the Fed to act in their September FOMC meeting to support unemployment and the US economic revival.

Astrazeneca shares slump on Crestor disappointment
Shares in Astrazeneca fell by 3% on Friday after shareholders were left disappointment by the failure of the firm’s cholesterol drug Crestor to beat rival Pfizer’s Lipitor in a clinical study. Astrazeneca shares were amongst the top five fallers in big cap London stock movers as a result.

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