Daily Market Commentary 4th February 2022

Global markets turned negative again overnight, following a big miss on Facebook/meta revenues, drowning the tech sector. Attention in European markets was on the Central Banks. The Bank of England raised rates by 0.25%, in line with expectations, but it was almost voted by members to raise by 0.5%! The hawkish tone finally spread to the ECB, which failed to raise rates, but did recognise the inflation problem and look likely to cut all QE and raise rates in the second half of 2022. EU inflation is at a record high of 5.1%, despite depressed growth rates and an energy crises, while the PPI came in at a shocking 26.2% for the year. Inflation is a major problem across the global economy despite benign growth, stagflation. The EUR surged to 1.1430, while the GBP hit 1.3600, looking ‘bid’.

European and US Bond Yields, all surged on the back of the Central Bank news and markets reacted accordingly. Commodity currencies gained on the softer reserve, with the NZD rising to 0.6650, while the AUD pushed up to 0.7140. All attention now turns to the all important Non-Farm Payrolls number, which looks like being very weak and perhaps a potential shocker?