The nonfarm report showed weak data. The reporting season for the 4th quarter of last year is starting in the US.

by JustForex

Last week, investors’ attention was focused on US nonfarm payrolls data and FOMC meeting minutes. The FOMC report showed that an earlier rate hike may be warranted as the labor market remains tight and inflation remains high. In December, the nonfarm payrolls report showed that US private sector jobs increased by 199,000, while analysts had expected an increase of 450,000. This is weak data that confirms the fact that the labor market is slowing. But even though in December, the number of jobs was below expectations, the unemployment rate fell to a 22-month low, and wages rose significantly. The US unemployment rate fell to 3.9% from 4.2%.

By the time the stock, the market closed. On Friday, the Dow Jones (US30) index decreased by 0.01% (-0.25% for the week), S&P 500 (US500) decreased by 0.41% (-2.12% for the week), NASDAQ (US100) lost 0.96% and became the leader of the fall of the week (-5.06%) among American indices. At the same time, the S&P 500 index showed the worst dynamics of the beginning of the year for the last five years.

This week, a lot of performances of Federal Reserve officials, including Esther George, James Bullard, Loretta Mester, Charles Evans, Thomas Barkin, and John Williams, will be presented.

Their comments will be closely watched in connection with the last week’s Fed meeting minutes, which indicated that a “very tight” labor market and higher inflation could require officials to raise interest rates earlier than expected.

Also in the coming week, the start of the reporting season is planned. Investors will be able to see the fourth quarter results of several big banks, including JPMorgan Chase, Citigroup, and Wells Fargo.

According to Refinitiv, earnings for S&P 500 companies are expected to jump by 22.3%, which is a solid gain, but still less than the first, second, and third quarters. At the same time, analysts note that the market is now very “nervous” and set to sell at the first hint of bad news. Investors are moving out of technology-oriented stocks and into value stocks, which they believe may perform better in an environment of high-interest rates.

On Friday, European stock indexes closed lower as rising euro-zone inflation and disappointing US jobs data influenced investor sentiment. German DAX (DE30) decreased by 0.65% (0.00% for the week), French CAC 40 (FR40) decreased by 0.42% (+0.31% for the week), Spanish IBEX 35 (ES35) lost 0.43% (+0.26% for the week), the British FTSE 100 (UK100) was the exception, as it increased by 0.47% on Friday and became the leader among major European indices for the week (+1.12%). Inflation in Europe increased to 5%, the highest level since the founding of the European Union. This week, a performance of ECB representatives is expected, including ECB head Christine Lagarde. Investors will be watching these speeches closely, where there may be surprises about a cutting of the PEPP program or a quicker rise in Eurozone interest rates.

The US 10-year Treasury yields hit two-year highs by the close of the week, which had negative consequences for the precious metals market. Gold and silver are inversely correlated to government bond yields, so both metals declined sharply at the end of the week. As a result, gold is now perceived by investors very ambiguously. On the one hand, investors, who buy gold as a hedge against inflation, can lift gold prices, especially if US inflation data will be negative this week. On the other hand, higher inflation will encourage investors to buy the US dollar, which will push up government bond yields and have a negative impact on gold and silver.

Oil prices increased by 5% last week. Last week, government data showed that US crude inventories fell to their lowest level in the sixth straight week since September, suggesting a supply shortage. The turmoil in Kazakhstan and supply disruptions in Libya also influenced the rise in quotes. Analysts said oil prices were now balanced and should not be expected to rise above $85 a barrel.

Asian markets were mostly traded in positive territory on Friday. Japan’s Nikkei 225 (JP225) decreased by 0.03% (-1.10% for the week), Hong Kong’s Hang Seng (HK50) increased by 1.82% (-0.07% for the week), and Australia’s S&P/ASX 200 (AU200) added 1.29% (-0.80% for the week).

Chinese automakers are planning to unite with Nvidia to compete with Tesla.

At the commodities market, heating oil futures (+6.96%), lumber (+6.89%), coffee (+5.62%), natural gas (+5.5%), Brent oil (+5.34%), soybeans (+5.10%), WTI oil (+4.96%), and corn (+2.23%) showed the biggest gains by the end of the week. Sugar futures (-4.24%), silver (-4.14%), and gold (-1.76%) showed the biggest drop.

Main market quotes:

S&P 500 (F) (US500) 4,677.03 −19.02 (−0.41%)

Dow Jones (US30) 36,231.66 −4.81 (−0.013%)

DAX (DE40) 15,947.74 −104.29 (−0.65%)

FTSE 100 (UK100) 7,485.28 +34.91 (+0.47%)

USD Index 95.74 −0.58 (−0.60%)

• – Eurozone Unemployment Rate (m/m) at 12:00 (GMT+2).

by JustForex

This article reflects a personal opinion and should not be interpreted as an investment advice, and/or offer, and/or a persistent request for carrying out financial transactions, and/or a guarantee, and/or a forecast of future events.