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Hopes that the Fed will cut interest rates soon are dampened

The latest US labor market report was stronger than expected in November, weakening the prospect of an initial easing of key interest rates in the US. Employment growth in the world's largest economy has gained momentum and hourly wages have risen more than expected, while the unemployment rate has fallen contrary to expectations. The focus is now shifting to the Fed's last interest rate decision of the current year on Wednesday.

Alessandro Fezzi, LGT
Tempo di lettura
5 minuto
Federal Reserve Monetary Policy
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Although this weakened the prospect of a hoped-for easing of monetary policy in the near future, the solid employment figures were greeted with price gains on the New York Stock Exchange. The Dow Jones Industrial rose by 0.36% to close the week at 36,247.87 points. The broad market S&P 500 ended trading on Friday at 4,604.37 points, 0.41% higher than the previous day. The indices on the Nasdaq also gained around 0.4%. At the same time, the yield on ten-year US government bonds climbed to 4.25% and the US dollar gained against the backdrop of solid labor market data.

The US labor market created 199,000 new jobs in November, meaning that employment growth was stronger than economists had predicted (consensus 185,000). Although the employment trend has tended to weaken in recent months, the latest figures show that it remains quite robust. In addition, the unemployment rate fell from 3.9% to 3.7% and average hourly wages increased more than expected, which again increases the risk of inflation. The latest survey results from the University of Michigan provided a further positive economic signal. According to these, consumer sentiment in the USA improved in November. The consumer confidence barometer rose significantly from 61.3 to 69.4 points (consensus 62.0). At the same time, the inflation expectations of the private households surveyed also fell.

The Fed's interest rate decision on Wednesday is now eagerly awaited. The Fed is likely to leave interest rates unchanged again, but it is questionable whether Federal Reserve Chairman Jerome Powell will give clear signals for the interest rate easing anticipated by the financial markets. Investors will also be following the latest interest rate forecasts with great interest. 

On Asia's stock markets, the Chinese equity markets recorded losses at the start of the week after new data pointed to persistent deflationary pressure. Consumer prices fell by 0.5% over the year, the sharpest decline in three years. Producer prices even slumped by 3% in November compared to the same period last year. This was also the 14th consecutive month of PPI decline and the fastest since August. The Hang Seng Index in Hong Kong recorded a daily loss of 0.6%. In contrast, Japanese equities rose. The Nikkei 225 rose by 1.5% at the start of the week. South Korea's Kospi was up 0.3% and in Australia the S&P/ASX 200 started the week with a moderate gain of 0.1%.

Corporate news in focus: Oracle Q2 figures.

Economic data in focus: No important economic data to be published today. Meeting of EU foreign ministers in Brussels and continuation of the United Nations Climate Change Conference (COP28) in Dubai. 



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