The end of last week was alarming for Europe and positive for the United States. Following Germany, where the PMI indices came out weak, the UK reported. Foggy Albion is likely to start 2021 with a shrinking economy. IHS Markit data showed a stronger-than-expected contraction for the services sector.
According to preliminary estimates, the CIPS UK PMI fell to 38.8 in January from 49.4 in the previous month. The latest data point to the third consecutive month of decline in the services sector and the sharpest deterioration since May 2020. The lower activity level reflects a decline in both business and consumer spending in early 2021. Consumer demand dropped significantly and new projects were postponed as a result. The hopes for economic recovery are concentrated mainly in the second half of this year.
In the US, PMIs came out opposite. There is an acceleration in growth, which surprised part of the market. The forecast assumed a slowdown to 53.6 in the service sector and to 56.5 in the manufacturing sector. Preliminary estimates of economic activity in January came out not only higher than expected, but also showed an acceleration of growth to 57.5 in the services sector. The manufacturing sector accelerated to 59.1.
Both manufacturing and new export orders in the US were the highest since 2014, and job growth was the highest in 2 years. Business confidence remained high in early 2021, but declined relative to December.
Given this background, the stock market continues to ignore the negative data in Europe, as well as the tightening of quarantine. The S&P 500 is consolidating near its historic highs. Treasury yield is stable at around 1.10%. Investors expect new doses of stimulus for the economy. Despite opposition to Joe Biden's new bill from the Republicans, market players are confident that at least some part of this plan is still being implemented.
Main market quotes:
S&P 500 (F) 3,845.62 +11.37 (+0.30%)
Dow Jones 30,996.98 -179.03 (-0.57%)
DAX 13,879.00 +5.03 (+0.04%)
FTSE 100 6,695.71 +0.64 (+0.01%)
USD Index 90.273 +0.061 (+0.07%)
- – 11:00 (GMT+2) German IFO Business Climate Index (Jan).
by 2021.01.25, We advise you to get acquainted with the daily forecasts for the major currency pairs.
This article reflects a personal opinion and should not be interpreted as an investment advice, and/or offer, and/or a persistent request for carrying out financial transactions, and/or a guarantee, and/or a forecast of future events.Open Account