February 6, 2023

“US job growth in January exceeded expectation, continuing the trend of surprisingly robust labour market data. Nonfarm Payrolls grew by 517,000 against analysts’ predictions of 193,000, whilst the unemployment rate dropped from 3.5% to 3.4%. Since the release on Friday, the US dollar has gained over 1.5% on the Euro.”

Tim Hallinan – Trading Director

Main Headlines

Beijing has heightened its criticism of the US for shooting down a Chinese balloon that entered US airspace, calling it a “serious blow” to the relationship. The Vice Minister of Foreign Affairs, Xie Feng, lodged a formal protest with the US embassy in Beijing and came close to accusing the US of breaking international law. This escalated rhetoric shows that the dispute over the balloon is disrupting efforts to improve relations between the two superpowers.

Developers of renewable energy and battery storage sites are warning that a wait of up to 13 years to connect to the UK’s energy grid is putting investment at risk and hindering the transition from fossil fuels. National Grid reports that there are 600 projects, with a combined capacity of 176GW, waiting in line in England and Wales, compared to 64GW of connected capacity. Some battery, wind, and solar projects have been told they will have to wait until 2036 for a connection.

GBP

Sterling is well bid against most major currencies this morning. Energy experts and MPs have warned that Britain will face gas shortages and high energy prices next winter due to the failure of the government and Centrica to reach a deal on expanding the UK’s largest gas storage site. Senior Conservatives have warned Rishi Sunak that attempting to take Britain out of the European Convention on Human Rights will result in a significant rebellion against him and a guaranteed loss in the House of Commons.

EUR

Euro is weaker than most major currencies in the early morning trade. German Economy Minister Robert Habeck expressed optimism before leaving for the US on Monday. He said that the EU’s trade dispute with the US can be resolved soon. Italy’s National Cybersecurity Agency warned that thousands of computer servers have been targeted in a global ransomware hacking attack on VMware ESXi servers and advised organizations to take measures to protect their systems.

USD

The dollar is stronger against euro and weaker against sterling this morning. The lack of access to high-quality and affordable childcare has more than doubled its impact on the US economy over the past five years, now costing $122 billion in lost earnings, productivity, and revenue annually. The US has proposed deploying medium-range missiles in Japan as part of a plan to strengthen its defence against China. The location is yet to be determined, but the Sankei reported that Japan is considering the southern island of Kyushu as a possibility.

Markets

European stocks and US equity futures retreated as an unexpectedly strong US jobs report raised the prospect of more rate hikes from the Federal Reserve. Concern over US-China geopolitical tensions also weighed on sentiment. The Stoxx Europe 600 index retreated after closing Friday in a bull market, as investors showed their concern about a hawkish Fed. Contracts on the S&P 500 and the Nasdaq 100 both dropped by about 0.5%. An index of Asian equities also declined. The dollar climbed for a third day after a gauge of its strength rose more than 1% Friday, when figures showed a surge in payrolls and unemployment at a 53-year low.

Main Economic Data/Central Banks/Government (All Times CET)

8:00 a.m.: Germany Dec. Factory Orders
9:15 a.m.: ECB’s Holzmann speaks
9:40 a.m.: BOE’s Mann speaks
11:00 a.m.: Euro-area Dec. Retail Sales
2:30 p.m.: Ukraine 4Q GDP
6:00 p.m.: BOE’s Pill on web event
UK nurses and ambulance drivers on strike

Corporate Events

Earnings include Tyson Foods, Take-Two Interactive, Pinterest, Activision Blizzard, Spirit Airlines

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