Please find this week’s edition of Weekly digest attached.
There was a subdued open to trading in the UK today with the FTSE 100 closing down 0.3%, echoing the weakness in Asia overnight where both the Hang Seng and Nikkei closed down 0.6%.
Despite a positive non-farm payroll reading on Friday (225,000 new jobs created in January vs. expectations of 164,000), the US market finished down 0.5% as did the UK. Nevertheless, both indices posted very strong gains for the week as sentiment with regard to the coronavirus started to improve, helping the US up 3.2% and the UK up 2.2% for the week as a whole. On the corona front today, the death toll is now put at 908 and the number of confirmed cases stands at 40,171. That said, the daily growth rate in the number of cases in China is now around 8%, down from 20% a week ago:
As China looks to reboot its economy after the extended lunar holiday, with many businesses still voluntarily closed, inflation data overnight revealed a sharp and unwelcome pick-up in prices. CPI inflation hit 5.4% in January, with a significant proportion of that driven by food prices which increased by 21%. Within that, the price of pork has more than doubled since last year.
The US results season is starting to wind down, with nearly two-thirds of the S&P 500 having now reported. Of those, roughly 71% have beat earnings expectations. This week’s US highlights include Pepsi and Cisco, whilst in Europe the likes of Nestle and Pernod will be the latest consumer goods companies to update. Over the next couple of weeks, it is the turn of Europe and the UK to pick up the baton with a slew of results, peaking in the last week of February.
On the economic front this week we have GDP data from the UK tomorrow, covering the Q4 that is almost certain to have been heavily distorted by the Brexit uncertainty. The market is looking for a year-on-year growth rate of 0.85%, a slowdown from the 1.1% reported in Q3. Wednesday sees European industrial production for December, which is expected to have fallen by 1.5%, followed by US inflation data on Thursday. Finally, on Friday we have German GDP data for Q4 which, given recent data points, could be ugly; the market expecting 0.1% quarterly growth and a year-on-year increase of just 0.2%.