Strong US jobs data spooks markets : Key Insights and Updates

A Challenging Week for Global Equities

The past week presented significant hurdles for global equities. The Nasdaq fell decisively below its 50-day moving average, while Treasury yields surged to their highest levels in over a year. Major indexes, including the Dow Jones, S&P 500, and Russell 2000, saw notable losses, with the latter testing its 200-day moving average. Defensive sectors like utilities and healthcare displayed relative strength, while the tech-heavy Nasdaq underperformed due to pressure on valuation-sensitive sectors.

Key Drivers of Market Weakness

1. Rising Yields: The 10-year Treasury yield rose to 4.77%, reflecting tighter financial conditions that pressured growth-oriented equities.
2. Strong Economic Data: December’s U.S. jobs report exceeded expectations, signaling sustained momentum in the labor market.
3. Crude Oil Surge: Oil prices climbed last week due to new sanctions on Russia’s energy industry, adding inflationary pressure to the economic environment.

Technical Perspective on Markets

From a technical standpoint, the rally in equities appears fragile. Both the Nasdaq and S&P 500 face key resistance levels just above their current positions. While reclaiming their 50-day lines would mark a significant step forward, downside risks remain considerable. Recent lows provide limited support should further declines occur.

Market and Economic Update

Asian Markets

• Performance: Asian equities fell sharply on Monday.
  • Hong Kong’s Hang Seng, China’s CSI 300, and South Korea’s KOSPI declined on waning hopes for U.S. interest rate cuts after strong payroll data.
  • Australia’s ASX 200 dropped by 1.4%.
  • Japan’s markets were closed for a holiday.
  • India’s Nifty 50 Futures pointed to a weak opening.

U.S. Futures and Economic Indicators

• U.S. equity futures remained steady as investors awaited:
  • Producer inflation data.
  • Remarks from Federal Reserve officials.
  • Corporate earnings from major banks expected later in the week.

European Markets

• European equity indexes closed lower on Friday:
  • The DAX, CAC 40, and FTSE 100 fell between 0.5% and 0.8%.
  • Movers:
    • J Sainsbury dropped 4.3% after a weak Q3 update.
    • Mercedes-Benz rose 3.7% due to stronger-than-expected Q4 sales.

Currency and Commodity Movements

U.S. Dollar

• The dollar started the week strong, bolstered by robust U.S. jobs data.
  • Against the euro, the dollar rose 0.2%, with the euro slipping to $1.0216, near its weakest level since November 2022.

Oil Prices

• Oil prices surged on Monday:
  • Brent crude rose 1.8% to $81.22 per barrel.
  • Drivers included stringent U.S. sanctions on Russian oil exports and heightened seasonal demand due to a cold snap across the U.S. and Europe.

Noteworthy Developments and Equities on the Move

Corporate Updates

1. Delta Air Lines:
   • Forecast record profits for 2025, surpassing Wall Street expectations.
   • Shares hit a record high due to strong demand for premium travel and improved pricing power.
2. Constellation Brands:
   • Lowered its annual sales and profit forecasts.
   • Shares fell 14% as consumer spending on Modelo Oro and Corona Light beers weakened.
3. TSMC:
   • Reported Q4 2024 revenue of $26.36 billion, driven by a 57.8% YoY increase in December revenue, supported by strong AI chip demand.
4. Pfizer:
   • Announced positive results from trials of its experimental cancer treatment, sasanlimab, combined with the BCG vaccine.
   • Plans to seek regulatory approval for the treatment.
5. Mercedes-Benz:
   • Despite a 3% drop in core car sales for 2024, shares rose due to strong performance in high-end segments.
   • The company faces challenges in China and Europe but continues to focus on luxury models.

Upcoming Economic Data and Events

Key Global Indicators

• U.S.:
  • Major banks will release quarterly earnings as the earnings season begins.
  • Key inflation data will also be published.
• China:
  • Q4 GDP and trade data are expected to provide insights into economic conditions.
• Europe:
  • ECB meeting minutes and final inflation figures will be closely monitored.

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