- China's service PMI rose but details are mixed.
- Stock markets continue to set new highs. Same goes for EUR and JPY.
- Bond yields rose sharply in late US trading.
- Little news this week - focus on ECB meeting Thursday.
China’s service PMI rose again in January to 56.2
from 56.1 in December. However, the report was mixed with both new orders and expectations a bit lower.
In Spain prime minister Mariano Rajoy promised to disclose all tax returns and financial assets this week in a response to allegations that he and other leaders of the Conservative Party have received direct payments from companies – see WSJ.
US stock markets set new highs again on Friday following two days of slight decline. A healthy US job report and strong ISM manufacturing gave new impetus to the market. The employment report showed a healthy gain in job growth rising 157k in January but most important was substantial upward revisions to the previous months, see Flash Comment US: unemployment rises but job growth strengthens, 1 February. ISM saw a surprisingly strong rise to 53.1 from 50.2, beating consensus of 50.7. Asian stock markets are mostly higher this morning with Nikkei and Hang Seng both up 0.5% The S&P future is broadly flat from the close last week.
Despite being overbought on technical measures the stock market continues to reach new highs. Next test will be US negotiations on a deal to avoid the so-called sequester on 1 March, which implies automatic spending cuts of more than half percent of GDP. As the earnings season is coming to an end, the market will get less support from this front. This week will be very thin on the data front. Main event will be the ECB meeting on Thursday, where the ECB will be quizzed on the strength of the euro and the rise in short money market rates.
The US bond market saw significant volatility on Friday as yields dropped sharply following the labour market report only to rise even more following the strong ISM report and rising equity markets. The 10-year yield rose to the highest level in close to a year and has stayed high, trading at 2.04% this morning.
EUR/USD has taken a breather overnight after rising above 1.37 on Friday, the highest level since November 2011. USD/JPY continues the march higher, getting very close to 93. EUR/SEK has been unchanged after falling on the back of stronger PMI on Friday.
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