04 February 2021
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US data surprises to the upside

US ADP employment and ISM services data both surprised to the upside in figures released yesterday.


By Emirates NBD Research

  • US private payrolls increased by 174,000 jobs last month after declining by 78,000 in December according to the ADP National Employment Report. This beat market estimates of up-to 70,000 new payrolls for January. While the gains in hiring were broad, they were half the pace of the 347,000 monthly average job growth in the last six months of 2020. Hiring in the services sector was up by 156,000 jobs after declining by 73,000 in December. Employment in the construction industry rose by 18,000, while goods producers and manufacturers added 19,000 and 1,000 jobs respectively. The leisure and hospitality industry added 35,000 jobs after losing 79,000 positions in December. While the news is positive it could complicate President Joe Biden's push for a USD 1.9tn package to support the Covid-19 impacted economy, as some lawmakers worried about the ballooning national debt would resist the measures given the improving employment picture. 
  • The Institute for Supply Management (ISM) said its non-manufacturing activity index was up to 58.7 in January, from 57.7 in December, the highest level since February 2019. The employment index of services industry hit an 11-month high of 55.2 from 48.7 in December. The survey's measure of new orders for the services industry went up to a six-month high of 61.8 from 58.6 in December. The US services sector was particularly hard hit by Covid-19, as the pandemic shifted spending away from services to goods, with consumers choosing to stay away from crowded venues and businesses. Overall US consumer spending on services is about 7.5% lower than before the outbreak of the virus, the distribution of vaccines however has boosted optimism in the industry.
  • Turkish CPI inflation came in at 15.0% y/y in January, an acceleration on the 14.6% recorded in December, and more rapid than the consensus projection of 14.7%. The rise has been attributed in part to higher energy prices, but core inflation also accelerated, from 14.3% to 15.5%, and the key driver likely remains the lira sell-off we saw last year. This was in part driven by over-zealous rate cutting, but at present TCMB governor Naci Agbal remains publicly committed to the present tight monetary policy. The next MPC meeting is scheduled for February 18, and the lira’s appreciation yesterday despite the faster-than-expected inflation rate is testament to the present faith in the markets that the tight stance will be maintained.
  • Qatar’s PMI rose to 53.9 in January from 51.8 in December, marking the strongest overall improvement in business conditions in five months, and the fourth-highest level ever registered by the survey. New orders and output drove the 2.1 point rise in the headline PMI. Construction was the strongest-performing sector in January, followed by manufacturing, wholesale & retail and services  respectively.
  • In Italy, Mario Draghi, president of the ECB through the Eurozone crisis, has accepted a request from Italy’s president, Sergio Mattarella, to try and form a government. Failure by Draghi to form a unity government would likely prompt fresh elections in Italy, which is struggling with the coronavirus pandemic.

Today’s Economic Data and Events

  • UK Construction PMI (Jan) 13:30  Forecast 52.9                          
  • UK BoE Interest Rate Decision (Feb) 16:00 Forecast 0.10%     
  • US  Initial Jobless Claims 17:30 Forecast 830K           

Source: Bloomberg, Emirates NBD Research

Fixed Income

  • Treasuries continued to sink in the wake of strong US data with both the ISM services index and the ADP employment report coming in stronger than expected. The burgeoning recovery in the US economy may empower Republicans in their push to water down some of the Biden administration’s spending objectives even as Democrats continue to push for extra funds via budget reconciliation.
  • Yields on the 2yr UST gained marginally to 0.1171% but most of the action remains concentrated at longer tenors with the 10yr up 4pbs overnight at 1.1374%, helping to push the 2s10s curve back up above 100bps for the first time since mid-February while the 5s30s is over 145bps.
  • Bond markets generally were mixed despite the sell-off in USTs. European bonds were close to flat on the day while high yield rallied and emerging market USD bonds were flat with a negative bias.
  • The Bank of England is in focus for today and we expect no change to policy with rates to be held at 0.1%. We also don’t expect any imminent change in the bank’s quantitative easing target of GBP 895bn.
  • APICORP priced a 5yr USD 750m issue at midswaps +69bps. The regional energy focused lender is rated ‘AA’ by Fitch.


  • Currency markets were largely flat overnight with fairly subdued movement for most major pairs. The DXY has held steady above the 91 handle, finishing slightly lower at 91.140 while the JPY maintains its position just above 105.
  • Sterling is down by over -0.2% as focus turns to Thursday's BoE meeting and any potential news on negative rates. Commodity currencies rallied this morning after oil prices rose. Both the AUD and NZD are up by over 0.4% and 0.2% respectively. 


  • There was relatively little movement in key global equity indices yesterday, especially in comparison to the previous week or so. The mood was generally bullish on the back of hopes for stimulus and more positive news on the vaccine front, but this failed to translate into spectacular gains after those seen earlier in the week. Nevertheless, most benchmarks are now up w/w and ytd once again.
  • In the US there were some mixed results from big firms but a two-year high for services activity and positive jobs data helped to offset this. The NASDAQ closed flat at -0.02% while both the Dow Jones and the S&P 500 gained 0.1%.
  • In Europe, the FTSE 100 lost -0.1% and the DAX gained 07%. The composite STOXX 600 closed 0.3% higher.


  • The rally in oil markets keeps on growing with another day of sizeable gains. Brent futures closed up 1.7% at USD 58.46/b and are in touching distance of USD 59/b this morning while WTI was up 1.7% over at USD 55.69/b and is trading over USD 56/b in early trade today.
  • The OPEC+ joint ministerial monitoring committee issued a statement overnight to keep current policy unchanged—i.e., Saudi Arabia maintains its additional cuts in February and March while most other producers hold. Any decision for Q2 output levels will be announced at the next full ministerial meeting in March.
  • US crude stocks showed a very modest draw last week of less than 1m bbl while there were considerable builds in gasoline and jet/kerosene. Production held flat at 10.9m b/d while product supplied sank by 1.2m b/d to 18.5m b/d.

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Written By


Emirates NBD Research Research Analyst

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