Hey Folks, Super Bowl Weekend is upon us and it promises to be a great game! The markets, meanwhile, continue to move in both directions as Trump’s directives hit the news wires. Get my take on the current state of the markets in this week’s round-up!
MARKET SOUND BITES:
U.S. stocks finished lower during the week, although the S&P held up best, falling just 0.24%. Meanwhile, earnings-related headlines seemed to be the other notable driver of sentiment as investors digested another busy week of releases. According to data from FactSet, 77% of S&P 500 Index companies that have reported fourth-quarter results through Friday have posted consensus-topping earnings, with an average growth rate of 16.4% (compared with estimates for 11.9% earnings growth). Of the companies that have reported thus far, 63% have also surpassed sales expectations.
The week’s economic data releases kicked off on Monday with the PMI that showed factory activity in the U.S. expanded in January for the first time since 2022 while Services PMI for January declined from December, although the reading remained in expansion territory at 52.8. And on Friday we saw the Jobs numbers added 143,000 jobs in January, down from an upwardly revised reading of 307,000 in December and below economists’ expectations for 170,000. The unemployment rate also declined unexpectedly, to 4.0% from 4.1% in the prior month.
The week’s softer-than-expected employment data seemed to help drive positive returns for U.S. Treasuries as yields across most maturities decreased from where they ended the prior week.
In Europe the Bank of England cut its benchmark interest rate by a quarter point to 4.5%, saying it had made sufficient progress on subduing inflation and wage growth. The BoE halved its forecast for UK economic growth this year to 0.75%. According to the BoE’s latest projections, inflation is set to stay above target until 2027—six months longer than previously forecast. Across the Eurozone we saw that annual consumer price growth stayed above the ECB’s target for a third consecutive month in January, accelerating to 2.5% from 2.4% in December. Core inflation held at 2.7%. Services price inflation, which policymakers monitor closely, came in at 3.9%. We did see that factory orders in Germany jumped 6.9% in December, rebounding from a 5.4% drop the month before and exceeding consensus expectations for an increase of 2.0%.
In Japan the latest hawkish comments from the Bank of Japan led the yen to strengthen to the high end of the JPY 151 against the U.S. dollar range, from 155.2 at the end of the previous week. The yield on the 10-year Japanese government bond rose to 1.28%, from the prior week’s 1.23%, on expectations of further interest rate increases by the BoJ this year.
And across China markets rose in an abbreviated trading week as evidence of strong consumer spending over the Lunar New Year holiday offset Trump’s decision to slap a 10% tariff on Chinese imports. Travel and retail spending over the Lunar New Year holiday, a key consumption period for China, pointed to improved domestic demand. Box office receipts over the eight-day holiday jumped 18% to USD 1.3 billion over last year’s holiday. Despite the solid holiday sales data, other readings signaled weakness in the broader economy. The Caixin China General Services Purchasing Managers’ Index (PMI) slipped to 51 in January, down from 52.2 in December.
Enjoy this week’s market round-up;
Don’t Be A Rat Brain Trader – Be the Red Stripe Zebra !!
Trade Smart !
hpb
