Overnight Action Dominated by Subpar Tech Company Earnings… Now Investors Await U.S. January Jobs Data
February 3, 2023
North American stock futures and European share prices are mostly down with major tech firms like Alphabet, Amazon, and Apple leading the way. Such concerns also affected some key Asian stock exchanges where the Hang Seng and Shanghai Composite indices lost 1.4% and 0.7%.
Yesterday’s big drop in European 10-year sovereign debt yields was reversed partly, with 8-basis point drops today in Germany, Spain, France and the Netherlands as weill as a 6-bp slide in Italy. The 10-year Treasury yield is steady at 3.39%, as markets await the U.S. Labor Department’s employment situation report that is projected to show positive but significantly reduced jobs growth.
The dollar overnight fell 0.3% versus the yen and 0.2% against the euro, sterling and in weighted terms but also rose by 0.4% relative to the Canadian and Australian currencies. Oil and gold prices dipped marginally. Bitcoin is up 0.1%.
In price data reported today,
- Producer price inflation in the euro area slowed to a 13-month low of 24.6% despite a 1.1% monthly jump in December. Energy increased 2.5% versus November and 48.6% year on year.
- Turkish consumer price inflation of 57.7% in January was the lowest in 11 months, but that deceleration masks a huge 6.1% monthly increase, which was the most since last April.
- Turkish producer prices increased 4.2% on month and 86.5% on year (least in 13 months).
- Georgian CPI inflation last month of 9.4% was down from 9.8% in December and the least in 20 months.
- Various service sector and composite purchasing manager surveys for January reported today attest to receding inflationary pressure. Input price subindices hit a 27-month low in India, a 21-month low in Italy, and a 20-month trough in Spain, for instance.
French industrial production in December rose 1.1% on month and 1.4% on year. In Brazil, by contrast, industrial output ended 2022 with no monthly change in either November or December and the first year-on-year decline (1.3% in December) since last July.
The lifting of Chinese Covid restrictions had a large beneficial impact on retail sales in nearby economies. In Hong Kong, sales jumped 14.2% on month in December, resulting in the smallest year-on-year slide (0.7%) in 86 months. Singapore retail sales advanced 1.3% in December ad were 7.4% greater than a year earlier.
Consumer confidence in Mexico improved to an 8-month high in the final month of 2022.
Euroland’s composite purchasing managers index in January was revised 0.1-point higher to a 7-month high of 50.3. With inflation still stubbornly high and plenty of monetary restraint yet to impact activity and demand, however, it remains unclear if the feared significant recession has been avoided. The composite PMIs of Germany and France were still a tad under the 50 level of demarcation between contraction and positive growth.
China‘s January composite and service-sector PMI readings of 51.1 and 52.9 were above 50 for the first time since August. India’s composite PMI, which almost touched an 11-year high in December, slipped back to a 2-month low of 57.5 in January.
Britain‘s composite and service-sector purchasing manager indices were each revised higher, yet remained below December levels and at respective 2- and 4-month lows of 48.5 and 48.7 last month.
Australia‘s composite and service sector PMI readings also got revised higher, printing a 3- and 5- month highs of 48.5 and 48.6, which connote a continuing mild contraction.
At 50.7, Japan’s revised composite purchasing managers index surpassed 50 for the first time since October. The service-sector reading (52.3) also set a 3-month high.
Russia‘s composite and service-sector PMI readings were 49.7 (a 2-month low) and 48.7 (a 4-month low).
Sweden‘s services PMI fell 1.9 points to a 32-month low of 51.0 in January.
South Africa‘s Standard Bank private PMI fell back under the 50 level for the first time in 3 months to a 13-month low of 48.7. Singapore‘s private PMI improved from a 26-month low of 49.1 in December to a 2-month high of 51.2 last month. Lebanon‘s private PMI remained in contractionary territory but, at 47.7, was at a 2-month high. And the non-oil purchasing managers index of the United Arab Republic slid 0.1 point to a one-year low of 54.1 in January.
As expected, yesterday’s Czech National Bank interest rate announcement left such unchanged at 7.0%. It’s been at that level since a 125-basis point hike last June culminated 675 basis points of tightening in the span of just 12 months. Czech CPI inflation of 15.8% as of December remains far above the central bank’s policy interest rate.
Just In: The U.S. January employment situation delivered enormous surprises and electrifying market reactions. Jobs creation had been forecast to slow to less than 200k but instead leaped 517k, and the increases for November and December were revised upward by 71k combined. 517k was the third largest monthly increase in the past year and is over 100k greater than the 2022 monthly average gain in non-farm payroll jobs. But that’s not all. The jobless rate was expected to edged 0.1 percentage point higher but instead fell 0.1 percentage point for a third straight month and, at 3.4%, was its lowest since May 1969. The rise in jobs and drop in unemployment were not concentrated in any one or two sectors, meaning an absence of special factors to explain why experts got their forecasts so wrong. Yet despite signs of an extremely tight labor market, average hourly earnings posted their smallest monthly rise (0.3%) since September and smallest year-on-year increase (4.4%) in 17 months. Whereas the S&P 500 futures were indicating a 0.7% dip prior to the release, they now signal a 1.2% decline, and the indicated likely Nasdaq drop has ballooned to 2% from 1.2%. With the data giving the Fed scant excuse to pause tightening, the 10-year Treasury yield went from 3.39% before the data to 3.51% at present. The euro is now 1.7% below the 9-month high of $1.1034 hit in intra-day trading yesterday.
Copyright 2023, Larry Greenberg. All rights reserved. No secondary distribution without express permission.
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