US stock markets rallied, after suffering their worst weekly decline since October two weeks ago
amid better COVID-19 trends, vaccine optimism, monetary and fiscal tailwinds, and signs of renewed strength in the recovery. The Senate approved a budget plan for President Biden’s $1.9 trillion Covid-19 relief package early Friday without significant support from Republican lawmakers, who threatened to dump the bipartisanship pledged by the new administration.
On the economic front, weekly jobless claims totalled 779,000 last week, below the 830,000 estimate, and the lowest since late November. The ISM’s gauge of services sector activity rose to its highest level (58.7) since February 2019. According to ISM data, the expansion in the services sector has now matched that in the manufacturing sector, which is less exposed to social distancing measures. Job growth returned to the U.S. in January, with nonfarm payrolls increasing by 49,000 while the unemployment rate fell to 6.3%, reflecting a pickup in the number of employed and more people having left the workforce.
In Eurozone, the economy dropped by 0.7% in Q42020, as governments intensified social restrictions to contain a second wave of Covid-19 infections. However, the contraction was less than expected. For the year as a whole, GDP fell by 6.8% compared to 2019. Retail sales also came out better than expected, rising by 2% MoM in December after falling 5.7% in November. Finally, inflation figures surprised to the upside, as the Harmonized Price Index (HICP) rose 0.9% in January, compared with 0.5% expected. The pace of coronavirus vaccination in Europe remained sluggish but picked up in the UK, where more than 10.5 million people have received a first dose. The number of daily coronavirus infections also began to drop in some countries after a month of stringent lockdown measures across Europe.
In UK, the Bank of England kept interest rates unchanged at 0.1%, and also maintained the purchase plan at £895 billion.
Read the entire market report prepared weekly by Blackmount advisors.