The Weekly Wrap – Fiscal Stimulus News and a Busy Economic Calendar Drive the Markets

The Stats

It was a relatively busy week on the economic calendar, in the week ending 5^th February.

A total of 70 stats were monitored, following 57 stats from the week prior.

Of the 70 stats, 44 came in ahead forecasts, with 25 economic indicators coming up short of forecasts. There was just 1 stat that was in line with forecasts in the week.

Looking at the numbers, 40 of the stats reflected an upward trend from previous figures. Of the remaining 30 stats, 27 reflected a deterioration from previous.

For the Greenback, it was a 2^nd consecutive week in the green to mark a 4^th weekly gain in 5-weeks. The Dollar Spot Index rose by 0.51% to $91.042. A 0.53% slide on Friday saw the Dollar give some of the gains from earlier in the week, however. In the previous week, the Dollar had fallen 0.38% to 90.584.

Out of the U.S

It was a busy week on the economic data front.

In the 1^st half of the week, January private sector PMIs and ADP employment figures were in focus.

The stats were skewed to the positive, with the market’s preferred ISM Non-Manufacturing PMI rising from 57.7 to 58.7.

In January, the ISM Manufacturing PMI slipped from 60.7 to 58.7, the only blemish in the 1^st half of the week.

Nonfarm payroll figures were also positive mid-week, with the ADP reporting a 174k increase in nonfarm payrolls. Nonfarm employment had fallen by 78k in December.

In the 2^nd half of the week, the focus was on the U.S labor market.

In the week ending 29^th January, initial jobless claims came in at 779k, down from a previous week 812k.

At the end of the week, the numbers disappointed, however.

In January, nonfarm payrolls increased by just 49k. Nonfarm payrolls had fallen by 227k in December.

Despite the low rise, the U.S unemployment rate fell from 6.7% to 6.3%. A fall in the participation rate from 61.5% to 61.4% contributed to the fall in the unemployment rate.

Economists had forecast nonfarm payrolls to rise by 50k and for the unemployment rate to hold steady at 6.7%.

Other stats in the week included 4^th quarter unit labor costs and productivity figures along with trade data and factory orders. These stats had a relatively muted impact on the Dollar, however.

In the equity markets, the NASDAQ rallied by 6.01%, with the Dow and the S&P500 seeing gains of 3.89% and 4.65% respectively.

Out of the UK

It was another relatively quiet week on the economic data front.

Key stats included finalized January PMI figures and construction PMI numbers.

The stats were skewed to the positive, with finalized PMIs for both manufacturing and services seeing upward revisions.

Ultimately, a services PMI of 39.5 remained a concern, however, as lockdown measures hit.

The construction PMI also reflected the impact of the COVID-19 pandemic, with the PMI falling from 54.6 to 49.2.

While the stats drew interest, the main event was the BoE monetary policy decision.

As expected, however, the BoE left policy unchanged. The hold came amidst BoE expectations that the UK vaccination programme would fuel a rapid recovery in GDP towards pre-pandemic levels in 2021.

The topic of negative rates remained on the table, however, The BoE stated that it would take 6-months to introduce negative rates should the need for further easing arise.

In the week, the Pound gained 0.20% to end the week at $1.3735. In the week prior, the Pound had risen by 0.16% to $1.3708.

The FTSE100 ended the week up by 1.28%, partially reversing a 4.30% slide from the previous week.

Out of the Eurozone

It was a busy week on the economic data front.

In the 1^st half of the week, private sector PMIs, GDP, and inflation figures were in focus.

The stats were also skewed to the positive, though private sector activity contracted at a quicker pace in January.

The Eurozone’s Composite PMI came in at 47.8, which was revised up from a prelim 47.5, while down from a December 49.1. In December, the Composite had risen from 45.3 to 49.1.

4^th quarter GDP numbers fell by less than expected but were also disappointing, however.

In the 4^th quarter, the Eurozone economy contracted by 0.7%, following the 3^rd quarter’s 12.4% rebound. Economists had forecast a contraction of 1.0%.

Year-on-year, the economy contracted by 5.1%, which was better than a forecasted 5.4% contraction. In the 3^rd quarter, the economy had contracted by 4.3%.

In the 2^nd half of the week, Eurozone retail sales and German factory orders were mixed.

Retail sales rose by 2.0% in December, partially reversing a 5.7% slide from November.

German factory orders slid by 1.9%, partially reversing a 2.7% jump in November.

The German governments agreement to deliver more COVID-19 relief aid provided some support.

The ECB’s Economic Bulletin tested support, however, with the Bulletin highlighting downside risks.

For the week, the EUR fell by 0.74% to $1.2046, a 0.69% gain on Friday limiting the damage. In the week prior, the EUR had fallen by 0.29% to $1.2136.

For the European major indexes, it was a bullish week, bouncing back from the previous week’s sell-off. The CAC40 and the DAX30 rallied by 4.82% and by 4.64% respectively, with the contracted EuroStoxx600 gaining 3.46%.

For the Loonie

It was a relatively busy week, though the markets had to wait until Friday for any stats.

Key stats included trade and employment figures and the Ivey PMI for January.

In December, Canada’s trade deficit narrowed from C$3.56bn to C$1.67bn. That was of little comfort, however, with employment figures disappointing.

On the employment front, employment tumbled by 212.8k in January, following a 68.2k slide from December. As a result, the unemployment rate jumped from 8.6% to 9.4%.

The Ivey PMI rose from 46.7 to 48.4, in January, providing Loonie support on the day alongside rising crude oil prices.

In the week ending 5^th February, the Loonie rose by 0.16% to C$1.2756. In the week prior, the Loonie had declined by 0.35% to C$1.2777.

Elsewhere

A bullish end to the week delivered gains for the Aussie Dollar and the Kiwi Dollar.

In the week ending 5^th February, the Aussie Dollar rose by 0.44% to $0.7678, with the Kiwi Dollar ended the week up by 0.07% to $0.7198.

A 1.03% jump in the Aussie Dollar and a 0.59% gain in the Kiwi Dollar on Friday delivered the upside.

For the Aussie Dollar

It was a busy week.

Key stats included manufacturing, trade, business confidence, and retail sales figures.

In January, manufacturing sector activity picked up, with the AIG Manufacturing Index rising from 52.1 to 55.3.

Trade data was also skewed to the positive along with business confidence figures.

In December, the trade surplus widened from A$5.022bn to A$6.785bn.

For the 4^th quarter, the NAB Business Confidence Index rose from -8 to +14.

On the negative was a 4.1% fall in retail sales in December. The decline had come off the back of a 7.1 rebound in November, however.

On the monetary policy front, the RBA was also in action in the week.

While holding the cash rate unchanged at 0.1%, the RBA caught the markets by surprise, increasing its bond purchases by A$100bn.

At the end of the week, the RBA’s statement on monetary policy weighed on the Aussie Dollar early in the session. This was in spite of upward revisions to growth and employment forecasts.

Talk of extended policy support and uncertainty over what lies ahead had tested Aussie Dollar support before the Friday rally.

For the Kiwi Dollar

It was a relatively quiet week.

4^th quarter employment and December building consents were in focus in the week.

The stats were skewed to the positive, with employment rising by 0.6% in the 4^th quarter. Economists had forecast a 0.8% decline following a 0.8% decline in the 3^rd quarter.

As a result, the unemployment rate fell from 5.3% to 4.9% versus a forecasted rise to 5.6%.

Building consents were on the rise at the end of the year, jumping by 4.9%. In November, consents had risen by 1.2%.

For the Japanese Yen

It was a relatively quiet week.

Finalized private sector PMI figures for January were in focus in the 1^st half of the week.

Both the manufacturing and services sectors continued to contract at the start of the year.

The Services PMI came in at 46.1, with the Manufacturing PMI coming in at 49.8. In December, the PMIs had stood at 47.7 and 50.0 respectively.

At the end of the week, household spending figures were skewed to the positive, however.

Month-on-month, household spending rose by 0.9%, partially reversing a 1.8% fall from November. Economists had forecast a 1.9% slide.

Year-on-year, however, spending was down by 0.6%. Economists had forecast a 2.4% fall.

The Japanese Yen fell by 0.68% to ¥105.39 against the U.S Dollar. In the week prior, the Yen had declined by 0.87% to ¥104.68.

Out of China

It was a relatively quiet week on the data front.

The market’s preferred Caixin private sector PMIs for January were in focus early in the week.

In January, the manufacturing PMI fell from 53.0 to 51.5, with the services PMI sliding from 56.3 to 52.0.

The PMIs had followed the NBS numbers from the weekend that had also been skewed to the negative.

In the week ending 5^th February, the Chinese Yuan fell by 0.58% to CNY6.4658. In the week prior, the Yuan had risen by 0.83% to CNY6.4283.

The CSI300 rose by 2.46%, with the Hang Seng ended the week up by 3.55%.