Investments

Market round-up 3-7 February

Thomas Watts

 

This week

The first full week of February, depending on how you define a week, ends on the 9th, marking the 40th day of the year. When studying the major news stories that have driven the market recently, it is the number 40 which was surprisingly ubiquitous throughout.   

Global bourses recovered throughout the week from the initial shock of the Coronavirus, soothed by assurances from the Chinese authorities that the pandemic was closer to being quarantined. Interestingly, the word “quarantine” originates from the Italian quaranta, Italian for 40, denoting the days of isolation people and ships were forced to endure before they could enter Venice during the Black Death.

Global markets rejoiced at the news of China’s extra efforts to contain the virus, with the US dollar and technology stocks surging on Tuesday, causing the tech-heavy NASDAQ to hit record highs. The prices of safe haven gold and government bonds slid as investors noted the hundreds of billions of dollars that the People’s Bank of China poured into the financial system during the beginning of the week restored some form of calm. Spurred on by London’s mining blue chips and reversing their considerable falls from Monday, European equities also posted their best single day since mid-October on Tuesday. 

Thursday saw a fourth day of rallies as further news from China revealed that the nation planned to cut tariffs in half on some US products. The yield on Germany’s benchmark 10-year Bunds touched their highest in two weeks. With the average working week in the US consisting of 40 hours, much longer than in most other developed nations, rebounding US productivity numbers from the previous quarter also served to lift sentiment.

There was little chance for 40 winks for many analysts focussing on US labour data, with Non-Farm Payroll numbers released on Friday afternoon. The US economy added 225,000 jobs in January, exceeding expectations, while average hourly earnings year-on-year came in at 3.1%, again beating consensus. There was further cheer as the job data for both November and December were revised higher, re-affirming the resilience in the US market.

The week ahead

Love will be in the air next week as the next set of five working days count down towards Valentine’s Day. With a whole host of economic data releases for analysts to fall in love with, we start the week in the most romantic of countries, Italy. Often seen as a basket case within the bloc, Italy has suffered a cocktail of weak economic data and political uncertainty for a few years now, with constant worries that it may crash out of the Eurozone. With GDP remaining near-stagnant in the continent’s third largest economy, it will be interesting to examine Italian Industrial Production numbers released on Monday. Having failed to gain much traction, Italy’s manufacturing has been haphazard at best with a period of sustain growth failing to materialise. 

With the Six Nations also in full swing over the coming week, we head over to the land of the red rose for UK GDP figures released by the Office for National Statistics on Tuesday. GDP readings are extremely useful to economists, acting as a broad measurement and the primary gauge of an economy’s health. The numbers will measure the change in the inflation-adjusted value of all goods and services produced by the UK over the previous quarter. 

The middle of the week will see Jerome Powell, Chair of the US Federal Reserve, testify on the Semiannual Monetary Policy Report before the Senate Banking Committee, in Washington, DC. As head of the central bank, which controls short-term interest rates, Mr Powell has more influence over the dollar’s value than any other person. Traders scrutinise his public engagements as they are often used to drop subtle clues regarding future monetary policy.

Unfortunately, the increased sales of flowers and boxes of chocolate will come in too late to feature in this month’s Retails Sales figures. Rounding off the week will be numbers detailing the change in the total value of sales at a retail level, giving us some insight into US shopper spending and the overall confidence of the consumer.

 

The information in this blog or any response to comments should not be regarded as financial advice. If you are unsure of any of the terminology used you should seek financial advice. Remember that the value of investments can go down as well as up, and could be worth less than what was paid in. The information is based on our understanding in February 2020.