Friday’s US jobs report smashed expectations with the economy creating 353,000 new jobs during January, vastly exceeding forecasts of less than 200,000[1]. Unemployment held firm at 3.7% whilst average wage growth accelerated with the resilience of the jobs market on full show once again. The strength of the data likely puts an end to any hopes of a possible March rate cut by the Federal Reserve (Fed) given the underlying robustness of the US economy in the face of last year’s rate hikes, in addition to inflation which remains above target. Treasury yields retreated with the 10-year security ending the week 12 basis points (bps) lower at 4.03%. In what was the busiest week of earnings season so far, the S&P 500 rose by +1.9% in local currency with market beating results from the likes of Amazon and Meta Platforms helping to drive the market upwards.

Having flagged in our previous update of a pick-up in Chinese equities on the back of policy tweaks by the People’s Bank of China (PBOC), heavy selling pressure returned last week with the Shanghai Composite shedding -6.2% in local currency terms. Local indices have now sunk to their lowest level in for five years prompting the China Securities Regulatory Commission to release a statement flagging its intention to step up market stabilization measures. However, the statement was vague on detail and so time will tell as to how successful their actions may be. Elsewhere in Asia, the Nikkei added +1.0% with Japanese equities maintaining their strong start to the New Year. European equities were muted, the MSCI Europe ex UK index adding +1.0% whilst the FTSE 100 slipped by -0.3%.

In the commodities space, oil prices recorded their biggest weekly loss since November on hopes of a ceasefire between Israel and Hamas. Brent Crude declined by -5.4% to $77.53 a barrel although further strikes by the US on Houthi targets in Yemen over the weekend reiterates how precarious the situation in the Middle East remains. Gold edged higher, a weekly rise of +0.9% taking the precious metal to $2,035 an ounce whilst copper fell slightly to $8,374 a tonne (weekly fall of -0.9%) on concerns relating to China.

Week Ahead

Source: Refinitiv Workspace, 05/02/24

[1] US Bureau of Labor Statistics – Employment Situation Summary, January 2024

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