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US open jobs plummet, strengthening peak rates narrative

The number of positions available in the US labour market dropped rapidly in October to the lowest level since early 2021. That caused traders to speculate that the Federal Reserve (Fed) will leave interest rates unchanged at its final policy meeting next week and possibly even begin cutting rates early in 2024. Treasury yields fell across the curve on Tuesday and stocks were mostly up around the world with the exception of New York, which had a mixed trading day.

Shane Strowmatt, LGT
Temps de lecture
5 minutes
US labour market report newspaper

A total of 8.7 million positions were available in the US at the end of October, down from 9.4 million a month earlier, according to the Buerau of Labor Statistics’ Job Openings and Labor Turnover Survey. The hire rate changed little, but the number of hires in the accommodation and food services sectors fell by 110,000 positions in October. The US labour market remained largely intact for longer than many economists had predicted. High employment rates and earnings helped drive the economy by fuelling consumer spending. Nevertheless, the data has been weakening lately with the number of open positions falling from a high of more than 12 million in early 2022.

Traders saw in the data an opportunity to ramp up bets that the Fed has ended its interest rate hiking cycle and may begin cutting sooner than previously expected. Yields on US government debt fell across the curve with the ten-year Treasury yield trading around 4.17% on Tuesday, far off of the roughly 5% level it had reached less than 2 months ago.

In New York, stock indices were mixed in Tuesday trading as investors were already waiting for next week’s interest rate decision by the Fed. The Dow Jones Industrial lost 0.2% and the S&P 500 was down 0.1%. The Nasdaq-100 gained 0.2%.

In the Asia-Pacific region, stock markets were up across the board. Japan’s Nikkei 225 led gains, closing 2% higher on Wednesday following a positive Tankan survey. According to the report, business sentiment at large Japanese manufacturers improved to +12 in December from +6 in November. In South Korea, the Kospi was trading marginally higher. In Australia, the S&P/ASX 200 finished the session up 1.7% after gross domestic product came in at 2.1% year-on-year in the third quarter, ahead of market expectations. Hong Kong's Hang Seng Index gained more than 1%, while the Shanghai Composite was trading just slightly in positive territory.

Germany’s DAX reached a record high on Tuesday, finishing the session up 0.8% at 16'533 points. The previous record high was set in July. The DAX is up around 18% this year. France’s CAC 40 index is also only slightly below its record peak, finishing Tuesday’s session up 0.7% at 7386 points.

Corporate news in focus: There is no major corporate news scheduled today.

Economic data in focus: German industrial orders (08:00 CET), euro area retail sales (11:00), US ADP National Employment Report (14:15), US trade balance (14:30), Bank of Canada interest rate decision (16:00), weekly US EIA Petroleum Status Report (16:30).


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Publisher: LGT Bank (Switzerland) Ltd., Glärnischstrasse 36, CH-8027 Zurich
Editor: Alessandro Fezzi
Source: LGT Bank (Switzerland) Ltd.

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