Market Commentary: Friday 7th February

Another NFP day. Ahead of this, Chinese stocks were in focus overnight. BYD shares have soared 20% this week as we await Autopilot updates, and overnight, the Hang Seng Tech Index rallied as much as +2.9% at one point.

The Fed’s Logan suggested that rates may already be close to neutral if inflation comes in close to 2% in the coming months—“it wouldn’t necessarily allow the FOMC to cut rates soon.” Meanwhile, the Fed’s Goolsbee also spoke overnight, stating that despite fiscal uncertainty, he still expects to cut rates over the next 18 months—“still think where we will ultimately land is a fair bit below where we are today.” A bit like the BoE, there is divergence within the camp.

Data-wise:

• Japanese Household Spending was very strong, rising +2.7% y/y in December.
• German Industrial Production was soft, falling -2.4% m/m and -3.1% y/y in December (expected: -0.7% m/m, -2.1% y/y).
• The German Trade Surplus widened unexpectedly to +EUR 20.7bn in December (expected: +EUR 17.0bn, prior: +EUR 19.7bn).
• UK Halifax House Prices rose +0.7% m/m, +1.6% q/q, and +3.0% y/y in January—Happy Days.

As for the day ahead, the Non-Farm Payroll number is expected to show 175,000 new jobs added to the US economy. Separate jobs data released Thursday showed that initial jobless claims picked up, while labour productivity remained robust. We also get the University of Michigan Consumer Sentiment data later today.

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