US Treasury yields were mixed, equities gained, Nvidia rose, and Tesla fell. The dollar strengthened, oil declined, gold hit record highs, and Bitcoin dropped by nearly 6%.

U.S. Treasury yields ended the week with mixed results. Short-term rates saw a slight increase, while long-term rates experienced a decline. The latest jobs report played a role in driving long-term bond yields higher, pushing the 10-year yield from 4.44% to 4.51%. However, the yield ultimately closed the week at 4.496%, marking a decrease compared to the previous week.

Equity markets closed the week in positive territory, with the Nasdaq 100 gaining nearly 2%. Small-cap stocks outperformed large-cap counterparts. Nvidia surged more than 8%, recovering from last week's decline, while Tesla fell over 6% amid investor concerns regarding Elon Musk’s increasing political involvement.

The US dollar strengthened against the euro, rising to 0.9681. Crude oil (WTI) prices declined 3.73%, pressured by rising US crude inventories and Donald Trump’s renewed pledge to expand domestic oil production. Meanwhile, gold climbed 1.94%, marking its sixth consecutive week of gains and reaching new all-time highs. In contrast, Bitcoin fell 5.97%.

January's US jobs report showed weak payroll growth but a surge in full-time jobs. Manufacturing improved, while services slowed. Consumer sentiment dropped, with inflation concerns rising.

January’s US jobs report showed weaker-than-expected payroll growth at 143,000, but full-time jobs surged to 135.9 million, marking the largest increase since the COVID recovery. The unemployment rate dropped to 4.0%, and average hourly earnings rose 0.5%. Despite weaker job growth, upward revisions to prior months and resilient full-time employment suggest the Fed will maintain its current stance on interest rates. Manufacturing saw modest improvement with the PMI rising to 50.2, while the services sector showed slower growth with a decline in the PMI to 52.8. Inflation, labour shortages, and rising costs remain challenges. Consumer sentiment fell 5% to its lowest since July 2024, with concerns over inflation pushing year-ahead expectations to 4.3%. Expectations for personal finances also declined. Despite these challenges, the services sector remains a key driver of economic growth, while inflationary pressures and tariffs could impact manufacturing. Consumer confidence may continue to decline before recovering.

January’s US jobs report showed weaker payroll growth but a surge in full-time jobs, reinforcing expectations that the Fed will hold rates amid inflation concerns.

January’s US jobs report showed weaker-than-expected non-farm payroll growth at 143,000 versus the 175,000 consensus; however, upward revisions of 100,000 to prior months and an unemployment rate of 4.0%, down from 4.1% previously, reinforce expectations that the Fed will maintain its current policy stance. At the same time, full-time employment surged to 135.9M in January from 133.5M in December—the largest MoM increase since the COVID-19 recovery—highlighting the resilience of the labour market despite broader concerns about job quality and sectoral distribution. Average hourly earnings increased 0.5% MoM, but a decline in the average workweek to 34.1 hours—matching pandemic-period lows—raises concerns about labour market quality. Benchmark payroll revisions were less severe than initially projected, with the 12-month downward adjustment reduced from 818,000 to 598,000, while stronger-than-expected job growth in late 2024 further weakens the case for near-term Fed easing. Notably, 88% of job gains since December 2022 have been concentrated in government, leisure & hospitality, and private education & healthcare—sectors typically characterized by lower wages and reduced job security. With core CPI expected to increase 0.3% MoM, well above the 0.17% MoM pace required to achieve 2% YoY inflation, the Fed is likely to keep rates on hold until Q3, despite ongoing concerns over the lack of job growth in higher-paying sectors such as technology, construction, and manufacturing.

We expect the government to start reducing job creation as Trump-era policies dictate, even laying off some public sector employees. However, the labour market should remain resilient throughout the year.

U.S. manufacturing showed modest improvement in January, while services activity slowed. Inflation, labour shortages, and tariffs posed challenges, but the services sector remained a key growth driver.

U.S. manufacturing activity showed signs of improvement in January, with the manufacturing PMI rising to 50.2 from 47.7 in December, marking the first increase in six months and reaching its highest level since August 2022. Despite this positive shift, output growth remained modest, and the sector continued to grapple with inflationary pressures, with input costs and selling prices increasing at their fastest rates in four months, rising by 5.3% and 4.9%, respectively. Manufacturers reported a slight rebound in new orders, with a 1.2% increase— the first rise in seven months— driven by stronger domestic demand. Employment surged at the fastest pace in two and a half years, with firms adding jobs at the steepest rate since mid-2022, reflecting optimism about the new administration’s policies. However, challenges such as labour shortages and rising costs persist, raising concerns that the Fed may adopt a more hawkish stance on monetary policy in the coming months.

In contrast, services activity slowed in January, with the services PMI falling to 52.8 from 54 in December, signalling a deceleration in expansion. Both business activity and new orders showed weaker growth, suggesting slower momentum in the sector. Despite this slowdown, employment in services increased at a faster pace, and new export orders saw an uptick. Adverse weather conditions impacted business levels and production, while concerns over potential U.S. government tariffs also remained. Inventories continued to contract for the third consecutive month, but the sector overall remains in expansion, albeit at a more moderate pace.

We anticipate further increases in inflationary pressures, which could impact business activity. Additionally, potential tariffs and the expulsion of immigrants from the country may place downward pressure on the manufacturing sector due to weaker external demand and a reduced labour force. However, we remain confident that the services sector will continue to drive overall economic growth in the first half of the year.

Consumer sentiment dropped 5% to its lowest since July 2024, with broad declines. Inflation concerns rose, pushing year-ahead expectations to 4.3%, the highest since November 2023.

Consumer sentiment declined for the second consecutive month, dropping 5% to its lowest level since July 2024, with declines observed across political affiliations, age groups, and income levels. All five index components weakened, led by a 12% drop in buying conditions for durables, partly due to concerns that it may be too late to mitigate the negative effects of tariff policies. Expectations for personal finances fell 6% from last month, reaching the lowest level since October 2023, as consumers increasingly fear a resurgence of high inflation. Year-ahead inflation expectations surged from 3.3% to 4.3%, the highest since November 2023, marking the second consecutive month of an unusually large increase and only the fifth such occurrence in 14 years. Long-run inflation expectations edged up from 3.2% to 3.3%, remaining elevated compared to the 2.2-2.6% range observed in the two years before the pandemic.

We anticipate a further decline in consumer confidence before sentiment begins to recover and expect a slight increase in inflation in the near future, as mentioned in our past reports.