UK Employment Down

OVERNIGHT Asian stock markets are mostly down this morning although Chinese indices have moved higher. That follows big declines in Europe yesterday and a smaller fall on Wall Street. Uncertainties regarding the Ukraine-Russia situation and the outlook for inflation and interest rates remain key factors for markets. Japanese GDP data recorded a 1.3% rise in activity in Q4 2021 following a 0.7% decline in Q3. Meanwhile, the minutes of the Australian central bank’s last policy meeting said it is prepared to be patient as it assesses the need for a tightening in monetary policy. THE DAY AHEAD Just released UK labour market data showed that employment fell by 38k in the three-months to December while the unemployment rate was unchanged at 4.1%. However, more timely figures for January saw a 108k rise in employees in employment while unfilled job vacancies rose to a record 1.3 million. Wage data was mixed as annual average earnings growth accelerated to 4.3% in December (from 4.2%) but fell modestly excluding bonuses. The German ZEW survey will be one of the first indications of the strength of the Eurozone economy in February. As a survey of financial analysts it can be less reliable than the PMI data but gets attention because of its timeliness. Last month’s update saw expectations climb to their highest since last July, but current conditions fell to its lowest since last June. This month, expectations may have slipped modestly but we look for a rebound in the reading for the immediate outlook as Omicron fears recede. In the US, January producer prices data will provide a gauge of pipeline inflationary pressures. Consumer price inflation surprised on the upside in January primarily because of energy prices, although ‘core’ inflation also continued to climb. The PPI will provide indications whether a further rise in energy prices could lead to inflation moving up again in February particularly as concerns about the Ukrainian situation put upward pressure on both gas and oil prices. Also of interest will be the New York Fed manufacturing survey for February which may show that the negative impact on activity from Omicron is fading. UK consumer price data for January will be released early Wednesday. Annual CPI inflation surprised on the upside for a third straight month in December rising to 5.4%, a rate not seen for almost thirty years. We expect it to stay at that level in January but with the regulated energy prices set to increase by more than 50% in April, inflation seems set to rise considerably further in the near term.


After choppy trading session both UK and US government bond yields ended the day up yesterday. In currency markets the US dollar started the week up against both the euro and sterling as it seemed to benefit from its perceived ‘safe haven’ status.

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