Markets are waiting for Powell and NFP

Despite another week of rising yields, the European markets managed to end last week in the black even after information that various inflation indicators are starting to increase again.

The indices are high

German DAX had a particularly good week, reaching the highest daily and weekly closes in over a year as confidence in falling energy prices and a more resilient global economy together with the reopening of the Chinese economy helps support a slightly less negative outlook for economic growth. US markets also managed to end the week in the black, breaking a three-week losing streak. Both the S&P 500 and Nasdaq 100 managed to rebound after finding support on their 200-day averages.

Friday's rebound took place against the backdrop of a sharp decline in US 10Y yields, which fell from the highest level since November above 4%.

Strong ISM report

Friday's ISM report showed that the big rebound in the US economy in January was a one-off, with the headline figure falling slightly to 55,1 from 55,2, with employment continuing to rise to 54 and new orders to 62,4. Although prices paid slowed down, they remained at a high level of 65,4. As a leading indicator, this is another indication that the US labor market remains very resilient, and the ADP and Job Openings (JOLTS) figures are also likely to add some insight into the US employment situation.

Powell before Congress

This week, in addition to Wednesday's data ADP and Friday payrolls report, the focus will be on Fed Chairman J. Powell's testimony before US lawmakers tomorrow and Wednesday, where he is likely to be asked how he views the US economy in light of the recent strong data and what actions Fed could take if the data were still strong.

It's unlikely the Fed will give too many clues given how close it is to the next meeting and the main takeaway is likely to be data reliance, but don't be surprised if markets ponder every nuance just to reinforce own unique way of thinking. Major interest rate decisions.

This week we have two more important decisions on interest rates, namely Rebuildables tomorrow and Bank of Canada on Wednesday, where the central bank may have reason to regret its decision to signal a pause at its last meeting given the strength of recent economic data.

China with centrally set GDP Over the weekend, the Chinese government signaled that this year's GDP target would be 5%, which seems a bit on the low side given that last year's 5,5% target was met in more difficult circumstances. It is also potentially disappointing in terms of global GDP prospects, as a more limited China means less demand potential. The lower-than-expected target may also suggest that Chinese officials are less likely to provide stimulus to the economy as they seek stability above all else. It may also be a confirmation that recent protectionist measures have damaged confidence in China as an investment destination, and as a consequence investors may be more cautious over the next 12 months.