Boss Pep Guardiola said his players' reaction to their first defeat of the season was the most satisfying aspect of the 3-1 victory over Newcastle.
Sergio Aguero's incredible scoring record against the Magpies continued with a match-winning perfect hat-trick - head, left foot and right foot - at the Etihad Stadium.
Aguero took his tally to 14 Premier League goals against Newcastle and in the process restored our lead at the top of the table to 12 points.
And following the only defeat of the season against Liverpool last time out, Guardiola was delighted with the reaction.
He said: "We avoided two bad results in a row.
"We dropped two points against Palace and got it back against Watford."
He added: "When you lose against Liverpool, you can shake hands with Jurgen Klopp and move on.
"The way we fought and the way we tried to play when they defended with many players in the box, that's why it is so good.
"We were able to make a good combination in attack. I'm so satisfied. You always have doubts after the Liverpool loss as to how we react."
The manager confirmed his January transfer stance that a striker is not required and again paid tribute to the goal-scoring brilliance of Aguero, who claimed his 11th City hat-trick.
"I said we are not going to buy a striker because we have Sergio and in two or three weeks we will have Gabriel Jesus back," Guardiola declared.
"We are so happy for him. He didn't touch the ball before the first and then he scored. He has a special gift."
Guardiola also praised Oleksandr Zinchenko for his performance at left-back, saying: "In the first half he was outstanding.
"He is a talented player - we insisted he was aggressive in the duels. He is loved because he is very nice, he always has a smile in bad moments.
"Now he has a chance because Mendy is out for a while and Delph is too."