Market update: Risk appetite beginning to firm but kept in check ahead of crucial US jobs data on Friday

In the US, despite recording a loss of 0.3% at the close of trading on Thursday, the S&P 500 index still managed to post its best monthly gain since October 2011, registering a rise of 5.1% for January. The Dow Jones index also closed down (0.4%). Even the highest Chicago Purchasing Managers’ Index (PMI) since April (55.6) could not move Wall Street higher at month end trading, as investors awaited the important January non-farm payroll report, the first in 2013, to be released today (consensus 165k). Since the Federal Reserve has linked quantitative easing to labour markets, the payroll reports are likely to be even more closely watched.

Overnight, despite a mixed picture, the gains in Asian shares were led by China’s Shanghai Composite (1.4%) followed by Japan’s Nikkei 225 (0.5%). Although the official Chinese manufacturing PMI in January came below expectations (50.4 versus 51.0), the final HSBC version was stronger (52.3 versus 52.0). Positive earnings reports and a weakening yen helped Japanese shares higher. Meanwhile in early trading in Europe, risk appetite is firming (FTSE Eurofirst 300 0.3%, FTSE 100 0.5% at the time of writing); however, mixed Chinese macroeconomic figures and the crucial US jobs data awaited today are steadying the advance. The gains in the FTSE Eurofirst 300 index is also tempered by recent negative headlines on the European banking sector, such as a big write-down by Credit Agricole and news of more UK mis-selling provisions.