Daily Market Commentary 4th February

Global equities took a breather overnight, following a strong two-day market rally. US equities are recovering the shock of the ‘reddit-retail short squeeze’ allowing the status quo to return. Brokerage firms have effectively limited the capacity of these renegade retail investors to invest, as institutions are able to do. The market turned attention to the avalanche of economic data being released overnight. Depressed  US PMI and ISM data was inline with expectations, while the ADP showed positive signs, revealing a sharp increase in private sector jobs.

European PMI data revealed extremely low Services and Composite PMI numbers, but in line with expectations considering the lock-downs across Europe. EU inflation jumped to 0.9%, surprising many, but remains severely depressed. The EUR traded 1.2020, while the GBP held 1.3650, despite severely poor economic data releases.

The NZD rallied strongly on better than expected employment numbers. The headline unemployment rate fell to 4.9%, much lower than expected, opening a much healthier economic outlook than many believed was possible. The NZ employment numbers are camouflaged with welfare and Government programs and key measurements diverge strongly from ‘real unemployment’ in the economy. The surprisingly strong data suggested the Reserve Bank may need to consider allowing interest rates to rise, but the Governor firmly shut the door on that, in line with global Central Banks. The NZD fell from highs of 0.7230 overnight, back to 0.7190, while the AUD regained 0.7600.

The plethora of economic data will continue, with the Bank of England rate decision tonight and Non Farm Payrolls on the morrow.