PMIs show diverging growth paths

US steaming ahead while Europe slows

Chart of the Day

The “flash” Composite PMIs for January showed very different growth outcomes for the US, eurozone and UK at the start of 2021. Faced with another lockdown and disruption from Brexit, the UK’s PMI fell sharply and implies output is contracting again. The eurozone PMI also fell into contractionary territory, but the US PMI jumped. At 58.0, it implies output is expanding at a rapid pace . Here’s to hoping that will also be reflected in better labor market outcomes in the coming weeks.

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Macro

While January may be weak, the UK retail sales data for December showed a rebound in growth.

In the US, existing home sales appear to have plateaued.

Consumer confidence remains unusually weak in Japan and Canada, whereas in China and Australia - two countries with positive virus outcomes - the situation looks much better.

Markets

It was a pretty mixed week for global advanced-economy stock markets, with the key exception of the Nasdaq which surged ahead.

That was partly thanks to a further fall in real rates, at least for the five-year.

After the small-cap Russell’s outperformance since November, traders are now neutral that index but long the Nasdaq.

Within the S&P 500, growth stocks are outperforming again, even if they were flat on Friday. This could be a sign traders have little faith in Biden getting much more stimulus through.

The positioning report also showed traders raised their bets against the USD, even amid signs it could do well if further stimulus makes the Fed more hawkish.

Finally, the strong run for agricultural commodities came to a dramatic end last week, with soybeans and corn both falling by a further 4.5% or so on Friday.

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