Daily Market Commentary 3rd February 2022

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US equity markets continued to stabilise, after the heavy losses suffered in January, questioning whether the market correction will now allow a rebound, or if it will melt down into a ‘bear market’? The US ADP jobs report was a shocker, with the Private Sector actually losing 301,000 jobs, while expecting to add 207,000 and reviewing last months big gains lower. This is one of the key market indicators into the all important Non Farm Payrolls, along with the Challenger Report, which could signal a bad number coming Friday. EU inflation hit a record high, rising to 5.1%, despite an economy mired in lockdowns and restrictions, smashing economic activity. The ECB has continued QE and has signalled no intention of raising interest rates, but this number may sobre their thinking come tonight’s meeting? The Bank of England are under no such illusion and are expected to once again raise rates, tonight. The EUR traded up to 1.1340, while the GBP pushed up towards 1.3600, anticipated a hawkish action from the Central Bank.

The weaker reserve allowed further recovery in commodity currencies, with the AUD trading back towards 0.7150, while the NZD struggled to hold above 0.6600. The NZ Unemployment headline rate fell to 3.2%, but literally no-one has any faith in the legitimacy of this number. The inclusions in the calculations are highly exclusive and thus the rate more than underestimates real unemployment in the economy, while new quasi unemployment/welfare support payments hide the reality. The Government has decided to announce the creation of an Unemployment insurance scheme, which is a welfare move intended to privatise the unemployment benefits, adding new taxes to the worker and employer, while building toward a social ‘living wage’ dream.

Markets are firmly focused on tonight’s Bank of England and ECB rate decisions and the US Non-Farm Payroll number.

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