03 February 2022
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ADP jobs numbers miss in January as Eurozone inflation spikes


By Emirates NBD Research

  • US Private payrolls decreased by 301,000 jobs last month according to the ADP National Employment, the first drop since December 2020, after increasing by 776,000 in December. The surprise drop in payrolls in the report on Wednesday was across all industries and business sizes. It added to a slowdown in manufacturing activity last month in suggesting that the economy lost significant momentum at the start of 2022 as coronavirus cases, driven by the Omicron variant, surged.
  • Eurozone inflation rose to a new record high hitting 5.1% y/y in January. The reading reflected soaring energy prices as expected but unprocessed food inflation also jumped more than 5%, an element that directly impacts EU citizens.  Inflation excluding food and fuel prices, closely watched by the ECB, slowed to 2.5% y/y while a narrower measure that also excludes alcohol and tobacco products slowed to 2.3% y/y. Both figures were well above expectations. The central bank, which will hold a policy meeting on Thursday, has for months shrugged off data showing prices climbing, arguing that temporary factors are behind the rise and inflation will abate soon on its own.  However, the rising inflation is piling pressure on the ECB to finally admit that price growth is not as temporary and benign as it has long predicted. Inflation is now more than twice the ECB's 2% target. 
  • The International Monetary Fund lowered its economic forecasts for the US, China and the global economy on Tuesday, and said uncertainty about the pandemic, inflation, supply disruptions and U.S. monetary tightening posed further risks. Global growth this year at 4.4%, drops 0.5pp lower than previously forecast, mainly because of downgrades for the USand China, and that is expected to slow to 3.8% in 2023, a 0.2pp uptick from the previous forecast in October. The US economy is now forecast to grow by 4% (1.2pp lower) in 2022, with growth seen easing further to 2.6% in 2023. China's forecast is cut by 0.8pp to 4.8% in 2022, with growth to edge higher again to 5.2% in 2023. The IMF also cut its forecast for the Euro area by 0.4pp to 3.9% in 2022 and said growth there would slow to 2.5% in 2023. India and Japan saw their forecasts upgraded somewhat.

Today’s Economic Data and Events

  • 13:30 UK Composite PMI (Jan) Forecast 53.4
  • 13:30 UK Services PMI (Jan) Forecast 53.5
  • 16:00 UK BoE Inflation Report                     
  • 16:00 UK BoE Interest Rate Decision (Feb) Forecast 0.50%             
  • 16:00 UK BoE MPC Meeting Minutes                        
  • 16:45 UK Deposit Facility Rate (Feb) Forecast -0.50%
  • 16:45 ECB Marginal Lending Facility Forecast 0.25%
  • 16:45     ECB Monetary Policy Statement                                 
  • 16:45     ECB Interest Rate Decision (Feb) Forecast 0.00%
  • 17:30     US Initial Jobless Claims Forecast 245K   
  • 17:30     ECB Press Conference                     
  • 18:15     BoE Gov Bailey Speaks 

Fixed Income

  • UST markets ended the day slightly higher as the US Treasury announced a smaller borrowing requirement in the coming months. Yields on the 2yr UST dipped by a bit more than 1bps to settle at 1.1535% and are extending gains in trade this morning while the 10yr yields was off by a similar amount to 1.7751%.
  • Market focus today will be on the Bank of England and European Central Bank. Gilt yields dipped overnight, down by 3bps on the 2yr and 4bps on the 10yr to 1.256% while the market still expects a 25bps hike from the BoE later today. For the ECB bund markets were relatively neutral as the market will watch how policymakers will address the persistently high inflation in the Eurozone.
  • Emerging market bonds were relatively quiet overnight with yields on Turkish 10yr government bonds up 5bps to 21.97% while South African yields fell by 3bps to 9.675%. Indian bonds were relatively stable.
  • Fitch has assigned an ‘A’ rating to the Public Investment Fund of Saudi Arabia with a stable outlook. The rating agency expects PIF to “gradually tap” capital markets in addition to receiving funds from the government.


  • The US dollar extended losses for a third day overnight as risk assets received a bounce. The broad DXY index fell 0.47% to 95.936 with EURUSD rising 0.29% to 1.1305, its fourth day in a row of gains. Creeping expectations that the ECB could raise rates as much as twice this year may help to narrow yield differentials between EUR assets and USD ones though we still think this view is premature. USDJPY also moved against the dollar with the pair falling 0.22% to 114.66.
  • GBPUSD added 0.4%, its fourth consecutive day of gains, to settle at 1.3577 in anticipation of the BoE later today where we expect a 25bps hike. Commodity currencies were mixed with USDCAD falling 0.14% in favour of the loonie to 1.2669 and AUD also gaining 0.11% to 0.7137. NZD was the outlier, falling marginally to 0.6632 and extending losses today even as the government in New Zealand has outlined a plan to finally open its borders.


  • Moves in European equity markets were fairly muted yesterday, ahead of the key central bank meetings today. The DAX closed flat while the CAC added 0.2% and the FTSE 100 0.6%. The UK index is one of the best performing amongst major DM indices so far this year, benefitting from the ongoing rotation towards more value stocks.
  • US markets continued to shrug off some of the funk seen last week, as all three major indices moved higher again. The NASDAQ added 0.5%, the Dow Jones 0.6% and the S&P 500 0.9% as equities benefit from some strong earnings results in the past several days. However, all three remain down ytd and futures suggest there will be a renewed fall today following some late earnings results which were weak.
  • Within the region, the Tadawul lost -0.8%, the DFM added 0.1% and the ADX 0.2%. The EGX 30 added 0.8% while the Borsa Istanbul closed -0.7% lower.


  • Oil showed some indecisive response to the OPEC+ plan to continue adding 400k b/d in March as an initial pop higher following the news faded quite quickly. Brent settled up 0.35% on the day to USD 89.47/b while WTI added less than 0.1% to USD 88.26/b and both are testing lower this morning.
  • In reality, markets are less focused on the ability of OPEC+ to add barrels to markets than they are on whether sanctions will be imposed on Russia. With the two forces acting powerfully against each other, oil prices may find a delicate stability before one dynamic resolves and prices move sharply in one direction or another.
  • In the US, commercial crude inventories fell by 1m bbl last week while draws in distillates and propane helped bring total petroleum stocks down almost 6m bbl. Oil production slipped back last week by 100k b/d to 11.5m b/d and may face more disruption in upcoming data points thanks to freezing weather conditions across much of North America.

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Written By


Emirates NBD Research Research Analyst

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