Weekly Market Wrap 03/02/2020-07/02/2020

Marius Paun | London, UK | Senior dealer | Friday, 07th February 2020

The US Department of Labour reported on Friday that the economy gained 225,000 payrolls in January vs +165,000 expected, adding that warmer weather helped boost the hiring. On top of that, the unemployment rate increased slightly to 3.6% vs 3.5% anticipated. Average hourly earnings rose 0.2% month on month. Strong gains came from education, health services as well as leisure and hospitality industries. The weaker spot was retail sales. The positive data was somewhat hinted at earlier in the week, on Wednesday, when the ADP report showed private payrolls climbing to 291,000 in January vs predictions for a rise of just 157,000 jobs.

China reopened for business after a week-long break due to the Lunar New Year holiday. As feared the coronavirus outbreak took its toll and Shanghai stock market opened nearly 9% down. Caixin Manufacturing PMI for January came in at 51.1 vs 51.0 forecasts, although the expansion was at the slowest pace since August last year. There are widespread expectations the epidemic will push the economic growth rate down, possible to 5%. Furthermore, the People’s Bank of China also threw its weight behind the economy by promising to boost liquidity through a 1.2 trillion yuan injection.

UK Prime Minister Boris Johnson said his country wants a trade partnership with the EU as fresh worries of a no-deal exit resurfaced. On the other hand, Michel Barnier, speaking on behalf of the European Union, admitted that his side does not want ‘UK to diverge from EU rules’.

Meanwhile, ECB President Christine Lagarde said ‘low rates and low inflation has significantly reduced scope to ease policy’. Really? German December factory orders unexpectedly dropped 2.1%, the lowest reading since September 2009 (vs +0.6% consensus). Maybe she’s starting to get fed up with the fact that mainly monetary policymakers are taking action in Europe. Maybe it’s time to force the issue on the fiscal front as well, especially in Berlin?

Reserve Bank of Australia left the cash rate unchanged at 0.75% during its monetary policy meeting, adding that the rate is scheduled to remain low for an extended period. The Australian economy is forecast to grow around 2.75% this year and 3% in 2021. The central bank reiterated it’s the stance of being ready to ‘intervene and ease if needed to support sustainable growth’.

Lastly, OPEC+ (OPEC plus Russia) is recommending 600,000 barrels per day output cuts in the light of slumping demand due to coronavirus. As always, compliance between all parties is the big issue here, so it remains to be seen who, in practice, is getting on board with that recommendation.