Coronavirus concerns continued to dominate the headlines as the number of confirmed cases jumped above 40K, the death toll surpassed 900 and there was another flurry of reports highlighting quarantines, travel restrictions, business closures, supply chain disruptions and growth risks. However, the WHO did point out that Wednesday was the first day since the outbreak that the number of new cases dropped. China stepped its support measures last week and is expected to do more. The People’s Bank of China (PBOC) injected nearly $250bn via reverse repos and cut some key money market rates. Reuters reported that the PBOC is likely to lower its key lending rate (the loan prime rate, LPR) on February 20, and cut banks reserve requirement ratios (RRRs) in the coming weeks.
Presidents Trump and Xi Jinping held a conference call on Thursday where they “agreed to continue extensive communication and cooperation between both sides”. They also noted the great achievement of the recent United States – China Phase One Trade Deal and reaffirmed their commitment to its implementation. Also, China announced that it will halve tariffs on 1,717 US goods ($75bn worth) starting on February 14, which is part of the Phase One deal. Lastly, US Economic Adviser Kudlow also said auto tariffs on Europe are on hold right now as two sides work toward a trade deal.
The payrolls growth was stronger than the market expected (225k vs 165k expected), up from 147k in December. The three-month average was a healthy 211,000. The numbers were helped by clement weather which boosted jobs in construction and leisure. Wage growth remained moderate at 3.1% y-o-y in January, up from 3.0% in December, while the unemployment rate ticked up marginally to 3.6% from 3.5%.
US January’s ISM manufacturing index was stronger than expected at 50.9 vs. 47.9 in December helped by new orders and production back in expansion territory. ISM Non-manufacturing was also stronger than expected at 55.5 vs. 55.1 and 54.9 in December. Eurozone Final PMI for January came out higher than the flash estimate and versus December at 51.3, signaling continued expansion and the highest reading since August. Manufacturing PMIs were higher at 47.9 (46.3 in Dec.), while services ticked slightly lower at 52.5 (52.0 in Dec.). Business confidence is now at a 15-month high. Germany improved at 51.2 (50.2 in Dec.) while France disappointed. UK PMIs improved further with the composite at 53.3 (52.7 in Dec.) with both the services and manufacturing sectors improving.