Weekly reviews

US labor market strong is offset by political risks, global markets continue to consolidate

On Friday, the positive market sentiment returned to global markets amid busy news day and the strong economical data. The financial and oil and gas sectors in Europe and the United States were leading the growth. Business activity data in the Eurozone services (PMI), strong labor market data in the US, as well as the prospect of deregulation of banking activities in the United States, brought back risk appetite. As a result of the day, European indices showed moderate gains, while markets in the US have returned to historic highs. President Donald Trump has signed a decree lifting the part of the restrictions in the banking sector, imposed by his predecessor. The number of people employed in the non-agricultural sector of the US in January amounted to 227,000 people, which was the biggest gain in four months. Analysts in the poll had forecast growth of only 197,000 jobs. At the same time, the unemployment rate rose to 4.8%, while wages grew by only 0.1% in January.

After the publication of the US statistic data, the market confidence on aggressive policy of interest rates  in the United States can waver. Weak wage growth is able to have a negative impact on the Fed plans to hike interest rates three times during the year.

Today, European stock markets are trading higher, on a background of positive statistics from Germany and high commodity prices. The rise in gold prices and high oil prices continue to have a stimulating effect on the energy and mining sectors. The volume of industrial orders in Germany rose by 5.2% in December from the previous month, with growth forecast of 0.5%.

Economic growth in Germany accelerated in the last quarter of 2016, and the increase in orders at the end of the year, allows predicting the growth of production in the beginning of this year.

The Bundesbank predicts that job creation continues unabated. At the same time, downside risks remain in the global economy that could hinder the development of export-oriented manufacturing sector in Germany. In addition, the acceleration of inflation threatens to reduce the purchasing power of consumers.

Oil prices are trading near highs this year, after it became known that the US government is willing to remove some restrictions from US energy companies. There are also fears that the United States imposed sanctions against Tehran which may affect the export of Iranian oil. Last Friday, oil futures for Brent attempted to gain a foothold above $ 57 per barrel. However, new data on the number of US drill limited opportunities for further gain. The data showed commissioning of 17 new units. From a technical point of view, the market situation does not involve further growth. We believe that the market will try to gain a foothold on the nearest support levels of $ 56.45- $ 56.80.

Despite the restrained trading during the last week, on Friday the positive sentiment and risk appetite prevailed. Corporate and macroeconomic reports continue to be an important and stable source of positive market sentiment. The growth of oil prices also adds a certain optimism for the players. This week, players will continue to monitor the actions of the new US administration. The risk remains on protectionist rhetoric in trade relations with China, and actions aimed at weakening the US currency. Today, investors expect Draghi's speech in the European Parliament, as well as details on Brexit. FOREX market starts a new week with US currency gain on the back of strong Friday data. However, a serious US dollar gain is not expected in the market amid US political factors. This week, the stock markets will try to keep their positions with possible local gain on favorable news from the political and corporative fronts.