US jobs
In the week ending Feb 5, the advance figure for seasonally adjusted initial claims was 223 000, a decrease of 16 000 from the previous week's revised level. The previous week's level was revised up by 1 000 from 238 000 to 239 000. The 4-week moving average was 253 250, a decrease of 2 000 from the previous week's revised average. The previous week's average was revised up by 250 from 255 000 to 255 250. The advance seasonally adjusted insured unemployment rate was 1.2 percent for the week ending Jan 29, unchanged from the previous week's unrevised rate. The advance number for seasonally adjusted insured unemployment during the week ending Jan 29 was 1 621 000, unchanged from the previous week's revised level. The previous week's level was revised down by 7 000 from 1 628 000 to 1 621 000. The 4-week moving average was 1 634 500, an increase of 16 500 from the previous week's revised average. The previous week's average was revised down by 1 750 from 1 619 750 to 1 618 000.
US other
Contrary to what Jerome Powell and his members of the Federal Open Market Commission were saying just a few moths ago about how "transitory" the US inflation figures were, US CPI came out last week and delivered another body-blow. Inflation has been driven higher by soaring demand and lack of supply caused by the Sars-CoV-2 pandemic's global impact on trade, notably supply chain disruptions. Inflation in the US is now at a 40-year high and it is difficult to see how this type of inflation came be tamed with anything less than strict, swift and severe monetary tightening. Equity markets are now discounting at least a 50 basis point rise in US interest rates in Mar and maybe even more than that. The Consumer Price Index for All Urban Consumers (CPI-U) increased 0.6 percent in Jan on a seasonally adjusted basis, the U.S. Bureau of Labor Statistics reported last week. Over the last 12 months, the-all items index increased 7.5 percent before seasonal adjustment. Increases in the indexes for food, electricity, and shelter were the largest contributors to the seasonally adjusted all items increase. The food index rose 0.9 percent in Jan following a 0.5-percent increase in Dec. The energy index also increased 0.9 percent over the month, with an increase in the electricity index being partially offset by declines in the gasoline index and the natural gas index. America's total household debt rose by $1trn during 2021 to reach $15.6trn at year's end, the biggest annual increase since 2007. Car loans were a big factor; the loosening of Covid restrictions has unleashed a pent-up demand for vehicles. Credit-card balances increased in the fourth quarter by the largest amount since records began. The S&P 500 closed 1.8% lower for the week at 4 418.64 on Fri 11 Feb. Year to date, the index is down 7.3% from its closing level on 31 Dec 2021 of 4 766.18. From its pandemic low of 2 237.4 on Mar 23 2020, the market is now 97.5% higher. Market weakness was in evidence most of last week but especially after the release of the shocking CPI figures that showed inflation in January at a 40-year high of 7.5%. The talk on the street now is not even when rates will rise but by how much. Add into this mix the possibility of a Russian invasion of Ukraine and it's not difficult to see why equity markets are twitchy.
China
According to AsiaTimes.com, Chinese economists are sounding alarms about the potential knock-on effects of surging US inflation and coming interest rate hikes on China's already slowing economy, with the potential for falling exports, a weakening currency and capital flight all looming large. They are warning that when the US starts raising rates it could cause sudden capital outflows from China and put pressure on the renminbi currency. They said the Chinese government should prepare to stimulate the local economy with fiscal measures if demand for China's exports suddenly slows due to the weaker purchasing power of inflation-hit US consumers. And the Chinese authorities are doing exactly that. Jan money supply jumped last week as Beijing injected liquidity to stimulate the economy. M2 money supply growth for Jan surged to 9.8% vs the expected 9.2%, equalling 3.98 trillion vs 3.69 trillion expected. Beijing called for an easing in loan restrictions to inject fiscal stimulus into and economy currently struggling with the zero-Covid protocol and the ailing property sector. Analysts expect further fiscal easing in future as China looks to shore up its economy against multiple headwinds.
Commodities
The gradual rise in the iron ore price in recent months has been due partly to labour disruption in western Australia, home to 30% of global iron ore supply and 70% of China's iron ore imports. The large mining houses have warned of further labour disruption caused by western Australia's border closures due to the Omicron variant of the Sars-Cov-2 virus. Western Australia planned to open its borders last Sat Feb 5 but cancelled this on Omicron concerns, with no alternative date set. Rio Tinto (LON:RIO)'s iron ore chief executive Simon Trott expects 1H22 'to be particularly challenging', having already commented on the 'really tight labour market.' BHP has cited Western Australia labour disruptions as the primary reason behind the hit to its quarterly production. Fortescue Metals has also noted shortages in 'key specialist skill areas' and has warned the western Australia government of damage a further delay could cause. The state has ruled that mine workers must be triple vaccinated, and that workers must quarantine for 7 days, down from 14 days originally. The state has been closed off to the rest of Australia for almost two years, taking advantage of its natural isolation to keep cases low. The strategy has helped keep covid-19 cases to just 1 900, with nine deaths, in contrast to about 2.8 million cases and 4,300 deaths across Australia as a whole. Oil prices declined late last week as higher US inflation caused concern about aggressive interest rate hikes and investors awaited the outcome of US-Iran talks that could lead to increased global crude supply. The benchmark oil prices were also in line for their first weekly decline after seven consecutive weekly gains The US and Iran are currently in discussions to revive a nuclear deal, which resumed last week after a 10-day break. A deal could see the lifting of sanctions on Iranian oil and ease global supply tightness.
Global Trade
Despite seeing rapid export growth in the past decade, sub-Saharan African countries account for just 3% of global trade in goods and services, holding back Africa's development, according to a new World Bank report published last week. "To reduce poverty on a large scale and transform their economies, African countries must scale up and diversify their participation in international markets and global value chains," said the report, "Africa In the New Trade Environment: Market Access in Troubled Times." Two big trade efforts -- the European Union's Everything but Arms and the United States' African Growth and Opportunity Act (AGOA) -- remain underutilized, according to the report. Oil exports make up the majority of AGOA trade. Despite only making up a fraction of global trade relative to population, African nations are highly dependent on exports for their GDP. North America's exports make up just 30% of the economy, but this figure rises to 53% in sub-Saharan Africa. That means the region is highly vulnerable to external shocks.
UK/Europe
Energy conglomerate BP (LON:BP)'s profits hit an 8-year high following the recent surge in energy prices. BP made a profit of $4.1 billion in the final quarter of 2021 compared with only $115 million in the comparable quarter of 2020. For the year as whole, the group made a profit of $12.8 billion, which compares with a loss of $5.7 billion in 2020. Many of the other energy majors such as Chevron (NYSE:CVX), Exxon Mobil (NYSE:XOM) and Shell (LON:RDSa) have made similar jumps in profits, leading to speculation that this may attract windfall taxes in Europe and the UK, where consumers have been suffering because of rising energy prices. The UK's GDP grew by 7.5% for 2021 as a whole, a nice bounce-back from the 9.4% contraction experienced in 2020. But the momentum of that recovery definitely appears to have slowed in the second half, with Dec GDP growth falling 0.2% compared with the previous month, due mainly to a pullback in retail and hospitality sectors as the Omicron variant scared consumers away. Boris Johnson declared that all remaining Sars-CoV-2 restrictions could end this month in England, including the legal requirement to isolate after a positive test. The mandate to isolate has caused severe staff shortages, not least in the National Health Service.
Tourism
Australia's Prime Minister Scott Morrison has confirmed that the country will reopen its borders to fully vaccinated international travellers later this month. The move marks the first time since the onset of the pandemic in March 2020 that most international travellers will be able to visit Australia. In a press briefing Morrison said fully vaccinated travellers would be able to visit the country from Feb 21, 2022. "If you're double vaccinated, we look forward to welcoming you back," said Morrison. Unvaccinated travellers with medical reasons will need to continue to apply for travel exemptions, and will be required to quarantine in a hotel on arrival. The country has had some of the strictest travel restrictions in place to limit the impact of the virus, although cases have recently soared as the Omicron variant took hold. Rules have been gradually relaxed since late last year, with student and skilled migrants permitted entry, and Qantas resumed international flights in Nov 2021. The carrier had been due to restart its nonstop flights between Perth and London from Mar 27, 2022, but recently said that it was reviewing these plans in the light of western Australia's decision to delay the reopening of its borders. The UK government's "ineffective travel restrictions" to combat the Omicron variant caused a 7 billion loss to the UK economy last year, according to the World Travel and Tourism Council (WTTC). The global tourism body stated that the "attack" on the industry from the end of last year until January 2022 "proved ineffective at halting Omicron and devastating for the sector". The new figures also revealed that the global travel and tourism sector's contribution to the global economy lost an estimated 25.7 billion, due to the impact of worldwide travel restrictions to limit the spread of the new variant. Revenues at TUI (LON:TUIT), Europe's largest tourism company, were five times higher in the last three months of 2021 than in the same quarter of 2020, but still well below those of 2019. Now that many travel restrictions have eased, TUI expects bookings this summer to come close to pre-pandemic levels. According to Reuters, budget airline carriers Frontier Group Holdings and Spirit Airlines last week unveiled plans to create the fifth-largest US airline in a $2.9 billion tie-up likely to tighten competition against traditional carriers. The proposal to form a new no-frills carrier controlled by Frontier Airlines pushed up shares of Spirit as much as 18.7%, though several analysts pressed the airlines over possible difficulties in obtaining regulatory approval. The move comes at a time when the US airline industry is grappling with volatility in travel demand due to new Sars-CoV-2 variants. At the same time, costs are soaring on a combination of rises in wages, fuel prices and airport charges. Spirit's wage expense as a percentage of revenue shot up by more than 10 points last year versus 2019. Higher fees prompted Frontier to exit airports such as Los Angeles and San Jose in California, and stop serving Washington-Dulles and Newark. The merger, which is expected to close in the second half of 2022, is projected to result in synergies of $500 million a year, mainly through operational savings
Rest of World
Several thousand protesters marched in the Argentine capital, Buenos Aires last week to denounce the agreement reached between the government of centre-left President Alberto Fernandez and the IMF on the repayment of a $44 billion loan. On Jan 28, the Argentine president announced a new repayment deal with the IMF of a $44 billion loan granted in 2018 to the government of his predecessor, Mauricio Macri. Under the new deal, Argentina has committed to progressively reducing its fiscal deficit from three percent in 2021 to just 0.9 percent in 2024. According to the government, the agreement will not affect social spending or economic growth. After three years of recession, the last two of which were linked to the impact of the pandemic, the Argentine economy saw a strong rebound in 2021, with 10.3 percent growth for the first eleven months of the year. But inflation remains very high. In 2021 it was around 50.9 percent, while it is forecast to be 33 percent in 2022.
South Africa
President Cyril Ramaphosa addressed the nation last Thu 10 Feb in his sixth State of the Nation speech. This was a subdued affair in comparison with previous years, due to it being held in the Cape Town City Hall due to the fire damage in the National Assembly. The president made a significant change in this speech by reaching out to the private sector as part of a broader approach to tackle South Africa's chronic unemployment rate. This was welcomed by the private sector and it can only be hoped that a greater degree of trust and rapprochement can be achieved between government and business. The JSE All Share Index (Alsi) closed 1.6% higher at 76 383 on Fri 11 Feb. From its recent low point of 37 693 on Mar 19 2020, it has risen by 102.6%. Year to date, it is up by 3.6% from its close of 73 709.39 on Dec 31 2021.
The Fragile Five + Russia 
JSE listed company results out this week;
- 14 February 2022 - BHP
- 15 February 2022 - Glencore (LON:GLEN)
- 16 February 2022 - DRD Gold, Pan African Resources (JO:PANJ), Emira, Grindrod Shipping
- 17 February 2022 - Gold Fields (JO:GFIJ), Sibanye-Stillwater, ARB Holdings (JO:ARHJ)
Economic data releases this week;
- 16 February 2022 - SA Retail Sales December
- 17 February 2022 - Building Plans Passed December
- 22 February 2022 - Leading Business Cycle indicator December, Unemployment Q4
- 23 February - National Budget 2022
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