Facebook nosedives, Amazon skyrockets ahead of NFP

Volatility remains a key theme with stocks expected to bounce back from yesterday’s losses after upbeat Amazon earnings & ahead of NFP.

• Amazon Q4 results impress
• Non-farm payroll data expected to show 150k jobs added as Omicron spread
• EUR extends gains after ECB’s hawkish turn

European bourses are set to open higher, despite a huge sell off on Wall Street. The Nasdaq closed 3.7% lower in its worst daily performance since the pandemic started almost two years ago. 

Disappointing earnings from Facebook parent company Meta caused the selloff, with the stock tanking 26%, and the bleed across hurting the rest of the tech sector. Stellar numbers from Amazon after the close have restored some faith, at least for now. The Nasdaq futures are trading over 2% higher and Amazon is set to jump 14%. The level of volatility that tech earnings have brought to the market has been eye-opening and highlights how fragile sentiment is.

Central banks turn hawkish

European stocks are set to rebound from losses in the previous session, which saw both the BoE and the ECB monetary policy announcements. 

The BoE raised interest rates to 0.5% in a vote where 4 of the 5 policy makers wanted to hike rates to 0.75%. The vote was more hawkish than expected. ECB President Christine Lagarde also caught the market off guard with a hawkish turn in the post announcement press conference, no longer pushing back against the prospect of rate hike this year. 

The more hawkish stance from both the BoE and ECB, came following a more hawkish Fed. The message here is clear, that central banks are increasingly nervous over the elevated levels of inflation on both sides of the Atlantic. This in itself unnerved the markets yesterday sending stocks lower.

NFP

Today all eyes are on the US non-farm payroll report. Expectations are for 150k new jobs to be added in January, down from 199k in December. The December headline figure was short of expectations and there is a good chance that the January headline payroll count could also disappoint, given the -301k fall in ADP payrolls. The ADP report can be considered a good lead indicator for the NFP when there is a big deviation from expectations. 

The Fed has already said that it is willing to look past a weak NFP report owing to the rapid spread of Omicron in early January. With jobless claims data already starting to improve, it's fair to assume that the Omicron hit to the labour market will be brief and contained. With this in mind a weak result - in theory - is unlikely to cause a huge reaction in the market, perhaps as long as its not too weak,

FX

In the FX markets the EUR continues to power ahead following Christine Lagarde’s hawkish pivot. EUR/USD has retaken 1.1450 and is heading towards 1.1480 and fresh 2022 highs. Meanwhile EUR/GBP trades at year-to-date highs thanks in part to relative weakness in the pound.

Whilst sterling found some support following the BoE meeting, growing uncertainty over Boris Johnson’s future is keeping GBP in the red.