Marius Paun | London, UK | Senior dealer |Friday 07th May 2021
The US Jobs Report For April Weaker Than Estimated
Amid so much back and forth debate about rising yields, the US Fed Chair Jerome Powell came out this week saying the outlook has improved, but the economy is not out of the woods yet. On the other hand, Treasury Secretary Janet Yellen said mid-week that rates might have to rise to keep the economy from overheating. Her statement goes against Powell’s stance, who has refused so far to acknowledge the possibility of hiking any time soon. In reaction, the stock markets tumbled on heightened uncertainty with analysts weighing up who’s running who.
On Friday, we had the US non-farm payrolls data released, which showed only 266,000 new jobs added in April, much less than expectations for little under 1 million jobs. On top of that, the unemployment rate rose to 6.1% versus the consensus of 5.8%. Sector-wise, leisure and hospitality added jobs but manufacturing employment fell. Many employers are now struggling to fill vacancies even with wages on the rise.
Furthermore, March number of 916,000 jobs added was revised down to 770,000 but February was revised upwards to 536,000 from 468,000.
It appears that Beijing and Washington are ready to hold talks to discuss the trade deal. The US Trade Representative Katherine Tai is going to talk to her Chinese counterpart Liu He to review the existing agreement. We also saw China’s Caixin PMI for April figures for April; Services jumped to 56.3 from 54.3 previously and Composite 54.7 from 53.1 last time.
The European Union has come up with a proposal to ease restrictions on non-essential travel into the bloc for those tourists who’ve been vaccinated. There seems to be a sense of optimism making its way back into Brussels with ECB member Kazaks making a bold statement: there is a chance of slowing bond purchases starting in June this year!!!
In the UK, the Bank of England left the benchmark interest rate unchanged at 0.1% as widely anticipated, with all 9 members voting in favour. In addition, gilts purchases will stay at £875 billion and corporate bond purchases at £20 billion. The UK GDP is thought to have fallen by 1.5% in Q1 but expected to recover strongly to pre-Covid levels later in the year.
The US oil prices continued their advance this week to a high of $66.68 before retracing to $65.00 going into the weekend. Gold also enjoyed a good week, rallying to $1832 on Friday afternoon, on the back of ongoing speculation of returning inflation. Ethereum, the second-biggest cryptocurrency after Bitcoin by market cap, has hit a fresh record just shy of $3,600 following news of a potential digital bond sale on its blockchain. Does it seem that institutional adoption of crypto space is now well underway?
Marius Paun | London, UK | Senior dealer |Friday 23rd April 2021
European Central Bank Leaves Its Interest Rate Unchanged
The US President Biden announced this week he wants to almost double capital gains tax from 20% currently to 39.6% for those earning more than $1 million. The proposal is also for the top marginal income tax rate to increase from 37% to 39.6%. The aim is to pay for childcare and education. At the same time speculation has built that he is now ready to accept a 25% corporate tax rate (up from 21%) instead of 28% as even some Democratic senators are concerned with the initial proposed hike.
To counter this, the US Senate Republicans offered an alternative to the $2.2 trillion stimulus package that Biden wants to implement. They are ready to support an infrastructure bill of around $800 billion with little or no tax hikes apparently. The reactions in the markets were rather mixed, the US indices tanked yesterday, but going into the weekend it seems the buyers are back in charge.
On Tuesday, Chinese President Xi Jinping said his country will not pursue hegemony regardless of ‘how powerful they become’. His statement comes after a number of smaller nations in the region expressed concerns at ‘China’s aggressive foreign policy’. He also added that Beijing will champion globalisation and multilateral trading. It’s known that US-China relations are off to a rough start under Biden administration so we will wait and see how this latest statement is received.
As widely expected, the European Central Bank’s kept its benchmark interest rate on hold during its April monetary policy meeting. President Christine Lagarde said in her opening statement that ‘vaccine underpins expectations of a firm rebound in economic activity’. She reaffirmed the size of PEPP program of 1.85 trillion euro, QE purchases to continue at monthly pace of 20 billion euro and that the central bank is ready to adjust all of its tools if needed. The EURUSD broke above 1.20 this week.
In the UK, Bank of England announced a joint creation with the UK Treasury of a central bank digital currency task force, in line with many other central banks around the world. All nice and dandy but that digital currency will remain centralised….. thought one of the main reasons for cryptocurrency adoption is being decentralised.
We learnt that OPEC+ is planning to downgrade their April 28 meeting to a monitoring meeting instead. They had already pre-committed to the next months’ output so are probably happy to play the waiting game before taking action again. Meanwhile the US oil prices dropped this week to a low of $60.59 before rebounding to $61.7 on Friday afternoon.
Bitcoin saw a massive sell-off last weekend, the biggest drop in 2 months. One of the reasons behind it might have been a blackout in China’s Xinjiang region which apparently is responsible for a significant chunk of bitcoin mining. The incident saw an almost 50% decline in bitcoin’s hash rate – a rate which measures the processing power used to mine bitcoin and process transactions.