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DJ US January Labor Report Disappointed But Trend Should Improve Soon -- Market Talk

· 02/05/2021 09:46

0946 ET - The 49,000 rise in U.S. payrolls in January is weaker than anticipated, but the job creation pace should improve in the next months as Covid-19 related restrictions ease and the vaccination program gains momentum, James Knightley, ING's chief international economist, says. February's report should be better given that the California re-opening is underway, while the March release should also see the effect of New York restaurants reopening for dine-in, he says. "That said, we aren't going to get meaningful improvements in the labor market until Covid-19 containment measures are lifted on heavily impacted sectors such as travel, leisure and hospitality," he says, something that is likely to be several months away. (xavier.fontdegloria@wsj.com)

0944 ET - January's jobs report brings a drop in the jobless rate to 6.3% from 6.7%, but that "is nothing to get excited about," Pantheon Macroeconomics says. The research firm says "the modest 10K increase in private services jobs, after a 280K drop in December, seems reasonable," since December bore the brunt of new Covid restrictions. "The labor market was frozen at the start of the year," Pantheon says, adding that fully recovering the pandemic's 10M-plus job lost won't happen "until the economy can reopen more fully and people are confident in mingling again." (paulo.trevisani@wsj.com; @ptrevisani)

0850 ET - The dollar falls, sending the euro and sterling higher, after U.S. non-farm payrolls rose by slightly less than expected in January, while December's data were revised lower. Employment increased by 49,000 in January, compared to a forecast for jobs growth of 50,000 in a WSJ survey of economists. The unemployment rate, however, unexpectedly fell to 6.3% from 6.7%. The DXY dollar index falls to 91.2790 after the data, from 91.4250 beforehand. EUR/USD rises to 1.2004 from 1.1987 before the data and GBP/USD climbs to 1.3713 from 1.3689. (renae.dyer@wsj.com)

0840 ET - The U.K.'s departure from the EU has hit retail trade between the two territories as delivery delays and extra charges deter consumers, according to a study. More than a third, or 34%, of U.K. consumers have stopped purchasing EU goods since the country left the bloc last month, the survey of 1,000 U.K. consumers commissioned by cyber-security marketing specialist Eskenzi PR & Marketing shows. Higher costs, such as extra credit-card fees, sales taxes and customs duties, and delays were the biggest concern for younger consumers. "U.K. consumers are being put off buying goods from the EU due to the various complications Brexit has created," says Eskenzi co-founder and director Yvonne Eskenzi. (philip.waller@wsj.com)

0831 ET - Gilt investors' bets that the Bank of England's next move could be to soften current stimulus have propelled the 10-year gilt yield to a 10-month of 0.484% Friday, according to Tradeweb. An unexpectedly hawkish BOE meeting Thursday triggered an immediate gilt selloff. "With the Monetary Policy Committee expecting growth and inflation to recover swiftly and rethinking its balance sheet exit strategy, the overall message seems to be that the next policy move is more likely to be a tightening than an easing," says BNP Paribas's Paul Hollingsworth, adding that the investors' focus has now moved to the duration of monetary support. (lorena.ruibal@wsj.com)

0819 ET - U.K. housing stocks trade mixed after industry data showed house prices falling slightly in January, with early signs that the market could start to cool. January house prices were 0.3% lower than in December, though 5.4% higher than in January a year ago, according to mortgage lender Halifax. The monthly drop was the biggest since April last year and the annual rate of house-price inflation eased to its lowest since August, Halifax says. "Industry agreed-sales figures remain well above pre-pandemic levels, but new instructions to sell have decreased noticeably," says Halifax Managing Director Russell Galley. Barratt Developments, Taylor Wimpey, Persimmon and other builders gain, but estate agents such as Rightmove and Countrywide fall. (philip.waller@wsj.com)

0813 ET - Long-term Treasury prices fall ahead of a closely watched January jobs report, sending the 10-year yield up to 1.165% from 1.140%. The current level is the highest since March, amid expectations that 50K jobs were added last month, following disappointing 140K job losses in December. While Covid-19 restrictions keep a lid on employment, there's room for optimism as vaccination advances. Amherst Pierpont's Stephen Stanley expects that 300K jobs have been added. "I doubt that restaurants would have implemented further sharp job cuts last month," he says. "Other sectors...likely continued to exhibit strength." (paulo.trevisani@wsj.com; @ptrevisani)

0811 ET - Optimism over the global economic recovery should support risk appetite and lift the Swedish krona in the near-term, Bank of America says. The krona's outlook is likely to remain closely attached to risk sentiment, BofA analysts say. "The Riksbank is unlikely to be of much help for SEK given Sweden's inflation outlook, but the broader macro picture in Sweden remains better than that of the eurozone, which could indeed lend some support to SEK," the analysts say. The analysts expect the Riksbank to keep interest rates at zero for an extended period. They see EUR/SEK falling to 9.70 by year-end from 10.1231 at present. (renae.dyer@wsj.com)

0808 ET - The Norwegian krone has strengthened since November but remains undervalued and has scope for further gains in coming months, Bank of America says. BofA analysts expect EUR/NOK to fall to 9.90 by year-end from 10.3098 currently. The analysts say the krone should receive a boost from improved risk sentiment on the prospect of a global recovery as policies remain accommodative. The reopening of economies should also lift oil prices, supporting the krone, they say. "Third, we expect the Norges Bank to stick to its relatively hawkish guidance, pointing towards a hike by mid-2022, which is a reflection of the relatively good crisis it has had so far and its inflation outlook." (renae.dyer@wsj.com)

0751 ET - The dollar may rise in tandem with U.S. Treasury yields if data Friday show strong U.S. jobs growth in January. but the currency's gains should prove temporary, Societe Generale says. Another jump in yields could lead to a further dollar short squeeze where investors are compelled to close earlier bets on the currency falling after sharp appreciation, SocGen currency strategist Kit Juckes says. While 10-year Treasury yields push higher, Treasury Inflation-Protected Securities are marking time, he says. "That's one reason I think the medium-term dollar outlook remains negative, regardless of the U.S.'s strong economic performance." The dollar index drops 0.1% to 91.4320. January's U.S. non-farm payrolls report is due at 1330 GMT. (renae.dyer@wsj.com)

0744 ET - New corporate bond sales have gotten off to a blazing start this year, a move reminiscent of the race to raise funds in debt markets after the global financial crisis of 2008, LBBW says. Companies borrowed some EUR47 billion from euro debt market investors in January, marking a 23% increase from the previous month, which was already elevated, and hitting the highest level in more than a decade. "The only other January with a larger volume of new issues (EUR58.3 billion) was in 2009, when the primary market picked back up with recovery effects after the slump during the 2008 financial crisis," the German bank says. (lorena.ruibal@wsj.com)

0703 ET - Risk assets like corporate bonds are set to remain in demand, though signs of overheating are emerging in some markets, LBBW says. In this persistently low-interest environment, credit remains in favor mainly due to lack of other alternatives to generate income. But strong liquidity from central banks may have led to more speculative investments. "The more speculative the investment of this money becomes, the more risk there is of bubbles forming and at least temporary setbacks in the capital markets," the bank says, adding that it will continue to slightly underweight credits for tactical reasons for the time being. (lorena.ruibal@wsj.com)

(END) Dow Jones Newswires

February 05, 2021 09:46 ET (14:46 GMT)

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