Hey folks, interesting earnings, interesting price action and a ton of US Economic Data hitting the tape for the week makes for some scare the children moments! Here is my take on this week’s past market action.
WEEKLY SOUND BITES:
Equity markets remained volatile but recorded overall gains for the second consecutive week. It was one of the busiest weeks of the Q4 earnings reporting season, with 112 companies in the S&P reporting results. And we did see a few mega tech cap stocks driving significant market price moves staring with Facebook’s horrible numbers driving their share price down over 26% while both Google and Amazon coming in with very strong results moving markets higher. Energy still is outperforming for the year as we are seeing the price of Oil moving over USD 90 per barrel which will no doubt effect the inflationary environment.
The week’s heavy calendar of economic releases included data showing that manufacturing prices rose more than expected in January, reflecting modest upside surprises in gauges of factory activity. Measures of services sector activity fell back, probably reflecting the imprint of the omicron variant of the coronavirus, but not as much as expected. The big surprise for the week saw the US labor market data showed private payrolls firm ADP reported that its tally of private sector employment fell by 301,000 in January—the biggest drop since the start of the pandemic while Friday morning’s official Labor Department jobs report showed a surprising gain of 467,000 jobs in January—roughly three times consensus expectations—despite the impact of omicron. Most of these numbers reflect ongoing COVID adjustments so we could expect Jobs numbers to slowly move lower over the coming months. The unemployment rate ticked higher to 4.0%, but this seemed to reflect an increase in the labor force participation rate, which rose to its highest level (62.2%) since the start of the pandemic.
The jobs data pushed the yield on the benchmark 10-year U.S. Treasury note to 1.93% on Friday morning, its highest level since late 2019. Where we go from here is a big question market by most market participants yet in looking at the 30 Year Bond Yield it does not seem to suggest inflation will continue at these higher levels.
Equities in Europe weakened after European Central Bank (ECB) President Christine “Queen Bee” Lagarde made comments that appeared to leave the door open for a possible rate increase this year. Her comments came after the ECB decided to keep its deposit rate at a record low of -0.5% and stuck to plans to reduce asset purchases this year. Data released earlier in the week shoed that Eurozone inflation unexpectedly ticked up to a new record of 5.1% in January. Meanwhile, the BoE raised its key interest rate, with an eye toward curbing inflation that the central bank forecast could hit 7.25% in April. The Monetary Policy Committee (MPC) voted 5 to 4 to increase the bank rate by a quarter point to 0.5%. For the full year, the eurozone economy overall grew 5.2%, after a 6.4% slump in 2020. Separately, Eurostat data showed that the jobless rate fell to 7.0% in the eurozone in the final month of 2021.
Stock markets in Japan generated a positive return for the week while reassurances from the Bank of Japan (BoJ) that it had no plans to modify its policy boosted broader sentiment with the BoJ Deputy Governor Wakatabe said it is too early for the central bank to start tightening monetary policy when it has not achieved its 2% inflation target, as it could hinder the economic recovery. Japan’s core CPI rose 0.5% year on year in December.
China’s financial markets were closed during the week for the Lunar New Year. The manufacturing Purchasing Managers’ Index (PMI) declined to 50.1 from December’s 50.3 reading, and the nonmanufacturing gauge—which measures activity in the construction and services sectors—fell to 51.1 from 52.7. The 50-mark separates expansion from contraction. Meanwhile, the Caixin/Markit Manufacturing PMI fell to 49.1 in January, its lowest level since February 2020, from 50.9 in December, suggesting that smaller, private firms in China struggled last month.
Enjoy this week’s Round Up.
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