Europe
European equity markets have finished a rather choppy week on a positive note after a better than expected US January jobs report. The headline number of 227k came in well above expectations of 180k, but this really shouldn’t have been a surprise given the bumper ADP report seen earlier this week.
It wasn’t all good news as wage growth slipped back quite sharply, but following on from some fairly robust UK and European services PMI’s the news was enough to prompt a fairly decent end to the week, even though Fridays rebound hadn’t been enough to prevent the DAX finishing lower on the week. The FTSE100 on the other hand managed to recover most if its early week losses largely as a result of a slightly weaker.
The mining sector has had a rather disappointing session Friday, helped by a disappointing Chinese manufacturing survey, as well as slight tightening of money market rates by Chinese authorities. It’s not immediately clear what prompted this action, though there is speculation about rising concerns about a property bubble, and this slight rise could well be an attempt to warn that tighter policy is on the way. Glencore (LON:GLEN) and Antofagasta (LON:ANTO) are amongst the worst performers.
Banks and financials are also doing well on reports that US President Donald Trump is about to make good on his pledge to water down some of the more restrictive parts of the Dodd-Frank regulations brought in after the 2008 financial crisis and lighten some of the cost overheads on banks, with Barclays (LON:BARC) outperforming.
US
US markets opened sharply higher Friday, pushing the Dow back towards the 20k level after non-farm payrolls for January came in well above expectations, rising from 157k in December to 227k.
The latest ISM non-manufacturing numbers also pointed to a services sector that was in fairly good health, though price pressures came in at their highest levels since April 2014, putting upward pressure on the US dollar again.
Banks are amongst the best performers with Goldman (NYSE:GS) and JP Morgan (NYSE:JPM) higher on the back of the Dodd-Frank reports.
Amazon (NASDAQ:AMZN) shares are also in focus after the company reported a dip in profits and lower than expected revenues. The company also said it would be spending more money in expanding its logistics network, as well as boosting content for its Amazon Prime service.
In a sign that consumers remain happy to spend credit card company Visa (NYSE:V) reported better than expected revenues and profits for the most recent quarter.
Mobile camera manufacturer GoPro's (NASDAQ:GPRO) restructuring program seems to be having the desired effect as profits rose, even as revenues came up short. Guidance for the coming quarter was also on the weak side.
FX
The US dollar took a bit of a nose dive in the wake of Friday’s US employment report. While the headline numbers at 227k and the revisions were very positive, the wage growth numbers were abysmal, as the year on year number slumped from 2.9% to 2.5%. This lack of wage growth despite rising inflationary pressures would be unlikely to prompt any action on rates by the US Federal Reserve, before June this year. That being said with rising inflationary pressures in the ISM numbers this week, there could be some on the FOMC who think that rising prices require some form of rate response irrespective of what wages do.
The pound has once again underperformed after the latest services PMI numbers undershot expectations for January, coming in at 54.5, though it was notable that cost pressures continue to manifest themselves by way of input prices.
Commodities
Copper and iron ore prices came under pressure Friday after the surprise tightening of monetary policy by Chinese authorities. Copper closed lower for the third day in succession, after hitting two month highs earlier in the week.
Gold prices struggled to move higher despite Friday’s weak US wages numbers, though that might have something to do with the fact that they are already near two month highs
Oil prices have been surprisingly unmoved, though they have edged higher after the US imposed new sanctions against Iran, after they test fired a ballistic missile. They finished the week higher despite the fact that US rig counts remain at multi month highs and are expected to keep rising.
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