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DJ US Jobs Data to Test Dollar's Safe Haven Role -- Market Talk

· 02/05/2021 05:59

1059 GMT - The safe-haven dollar's recent resilience to positive market sentiment will be tested at 1330 GMT Friday when January's U.S. non-farm payrolls report is expected to show a return to jobs growth, HSBC says. "Today looks set to be an important signal for whether FX is truly getting over its risk on, risk off fixation and moving back to the more traditional world of interest rates and yield differentials as the key anchor for currency movements," HSBC's Dominic Bunning says. The dollar's recent appreciation, despite stock market gains, reflect higher U.S. Treasury yields on economic recovery hopes, he says. HSBC expects non-farm payrolls to rise 125,000 in January after falling 140,000 in December. The dollar index drops 0.1% to 91.4330. (renae.dyer@wsj.com)

1045 GMT - Anglo American stands out from its mining peers owing its exposure to platinum group metals and diamonds, which is attractive in the near term and offers more compelling growth, Berenberg says. The bank says it sees Anglo American as a defensive pick versus Rio Tinto and BHP, but that it prefers Rio Tinto over BHP in the near term on dividend upside. Berenberg initiates Anglo American with a buy recommendation and target price of 2,000 pence, while Rio Tinto and BHP are both placed at hold, with target prices of 6,000 pence and 2,000 pence, respectively. (sabela.ojea@wsj.com; @sabelaojeaguix)

1036 GMT - Corporate debt denominated in pounds is increasingly being driven by U.K. sovereign debt yields, Bank of America says. "Gilt yields jumped higher yesterday on the relative hawkishness of the [Bank of England rate] decision, a timely reminder for investors that rates are driving credit yields a lot more now," says the bank's European credit team. Currency-hedged investors can still find "best-in-class" yields at the front-end of the sterling credit market. For euro investors looking at sterling opportunities, the segment between 10-year and 15-year part of the curve, in the A-rated category, offers a attractive post-hedging yield pick-up of about 60bp, they say. In the BBB segment, investors will find the best sterling opportunities in 5-7 year maturities, analysts say. (lorena.ruibal@wsj.com)

1032 GMT - The Norwegian krone rises against the euro as oil prices jump on global economic recovery hopes and supply curbs by major producers. EUR/NOK falls 0.3% to a two-week low of 10.2911, according to FactSet. The rollout of vaccines has improved the global economic outlook while OPEC and its allies decided to maintain their supply-tightening policy Wednesday. "The Norwegian Krone typically trades as a function of oil prices and that suggests it should outperform as oil prices steadily rally as they fully price the re-opening of the global economy," Nordea Asset Management analyst Sebastien Galy says. Higher crude prices should also support other oil-related currencies, he says. USD/RUB falls 0.6% to 75.0622 and USD/CAD drops 0.3% to 1.2792. (renae.dyer@wsj.com)

1005 GMT - Markets interpreted the Bank of England's policy update Thursday more hawkishly than policymakers had probably anticipated, says Rabobank's Stefan Koopman. Leading to this interpretation were the announced six-month delay to any possible below-zero interest rate cut and a higher inflation forecast. Based on the operational hurdles and weak signalling "it would seem imprudent to have any pricing in of Bank Rate cuts until this 6-month period reaches its conclusion," Koopman says. A more optimistic economic outlook led rate-setters to project the consumer price index at slightly above the 2% target in 2022 and 2023, which formed "the crux of why the Monetary Policy Meeting was interpreted hawkishly," triggering a correction lower in gilts and lifting sterling, he says. (lorena.ruibal@wsj.com)

1001 GMT - The euro could fall to a range of $1.10 to $1.15 in coming months, from $1.1982 currentl,y as the U.S. economy's recovery is expected to outpace the eurozone's, Nordea Asset Management says. The U.S. could relax coronavirus restrictions sooner than the eurozone due to a faster vaccine rollout, which combined with the prospect of large-scale fiscal stimulus, should support the U.S. economy, Nordea analyst Sebastien Galy says. "This should drive the U.S. Treasury curve to steepen and bring forward a tad expectations of rate hikes," he says. A steepening yield curve is when the gap between short-term and long-term government bond yields widen and typically indicates investors expect stronger economic growth and rising inflation. (renae.dyer@wsj.com)

1000 GMT - Vinci's 2020 results showed an exceptionally strong free cash flow that supported a dividend in line with the previous year, UBS says. The French construction and infrastructure company's FCF generation was nearly flat year-on-year at EUR4 billion, compared with UBS's expectations of EUR2.1 billion. This was partly driven by a working-capital inflow of EUR2.3 billion, which led to net debt at EUR18 billion at year-end--around EUR2 billion below UBS's estimates. "As a result of this strong cash generation, Vinci is keeping the dividend flat at EUR2.04 vs consensus of EUR1.30," the bank says. Shares trade 5.6% higher at EUR85.82. (giulia.petroni@wsj.com)

0949 GMT - Despite significant new supply, European high-yield markets were "remarkably resilient" in January, says UniCredit. This was down to "unbroken demand for riskier credit" as riskier issuers took advantage of the attractively low financing costs, it says. High yield-rated bond supply totaled EUR14.9 billion as of the end of January, representing a 7.5% increase relative to the same period the year before. UniCredit expects the supply momentum to continue in February, despite a likely slowdown in 2021 due to a reduction in investment flows and the significant front loading of funding by many issuers last year. (lorena.ruibal@wsj.com)

0924 GMT - Sterling rises, extending Thursday's gains, after the Bank of England dampened the prospect of negative interest rates in the near term. Alongside its decision to leave its benchmark rate at 0.1%, the BOE said it would make preparations for negative rates but that could take six months while it expects a strong recovery this year. Commerzbank's Esther Reichelt says the BOE is unlikely to lower rates below zero but the post-coronavirus recovery will be overshadowed by increased trade obstacles due to Brexit. "We therefore expect Sterling to retrace its gains over the course of the year." GBP/USD rises 0.3% to 1.3702 and EUR/GBP falls 0.1% to 0.8748, having earlier reached its lowest level since mid-May at 0.8738, according to FactSet. (renae.dyer@wsj.com)

0924 GMT - The coronavirus pandemic has catalyzed the already existent trend of a shift to online retail in the U.K. and some retailers might ultimately emerge as winners from the change, Shore Capital says. "For the offline survivors, with much capacity removed, brighter times may be ahead, while most retail and food and beverage businesses have structurally enhanced their online capabilities," the investment group says. The nature and extent of remote working and its effects on urban centers may also bode well for the food and beverages industry in the long term as the current adjustments work through, Shore says. (matteo.castia@dowjones.com)

0923 GMT - Nonfarm payrolls in the U.S. are expected to rise by 100,000 in January after a fall of 140,000 in December, UniCredit says. The bank's estimate is higher compared with the consensus of economists polled by The Wall Street Journal, who expect payrolls to increase by 50,000. UniCredit's forecast is skewed to the upside following the ADP Research Institute's estimate that private-sector payrolls rose by 174,000 in January and better-than-expected jobless claims numbers, the Italian bank says. "With new Covid-19 cases peaking on Jan. 8 and falling quite quickly, along with some states either easing or planning to ease restrictions soon, payroll gains will likely accelerate next month," UniCredit says. The U.S. January employment report will be released at 1330 GMT. (xavier.fontdegloria@wsj.com)

0905 GMT - UniCredit doesn't rule out M&A and a merger with Banca Monte dei Paschi di Siena will be evaluated, the Italian bank's Chairman-Designate Pier Carlo Padoan told Italian daily La Repubblica in an interview. "We interpret Mr Padoan's words as an opening to M&A, where we see MPS as the most likely option, although we believe that an integration with Banco BPM would make more industrial sense," Intesa Sanpaolo analyst Manuela Meroni says. UniCredit shares rise 2.5%, while Monte dei Paschi is up 5.2%.(pietro.lombardi@dowjones.com; @pietrolombard10)

(END) Dow Jones Newswires

February 05, 2021 05:59 ET (10:59 GMT)

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