A slower pace of hiring in the US became the next piece of the labour market puzzle that is clearly showing cracks. Wall Street finished in the red on Wednesday and Asian stock indices were also down. Yields on US government debt were initially under pressure but bounced back Thursday morning.
The rate of hiring in the US slowed with payrolls increasing by 103,000 positions, according to the US ADP National Employment Report released Wednesday. The manufacturing sector as well as leisure and hospitality cut jobs. Slower rate of hiring comes one day after the US ADP report showed the number of open positions in the US fell to the lowest level since early 2021. Official government labour market data is due on Friday before the Federal Reserve (Fed) announces its last interest rate decision of the year next week. It is widely expected to keep rates unchanged.
The weak US jobs data has put more pressure on yields with the benchmark ten-year US Treasury yield trading around 4.16% after bouncing back a bit on Thursday. That level is far below the roughly 5% peak it had hit less than two months ago.
In New York, stock indices started the session strong but ended the day in the red. The Dow Jones Industrial lost 0.2% and the S&P 500 was down 0.4%. The Nasdaq-100 lost 0.6%.
In individual stocks, Merck KGaA shares dropped about 13% on Wednesday after the German company’s multiple-sclerosis medicine failed in a trial. Evobrutinib’s efficacy proved to be weak in the final stage of testing, slashing hopes that the medicine could drive growth at Merck KGaA’s healthcare division.
In the Asia-Pacific region, stock markets followed Wall Street down. Chinese trade balance data was surprisingly positive for the world’s second-largest economy with exports increasing 0.5% and imports decreasing 0.6% on the year in November. Nevertheless, Hong Kong's Hang Seng Index lost 1.2%, while the Shanghai Composite was trading 0.1% lower. In Tokyo, the Nikkei 225 closed down 1.8% and in South Korea, the Kospi closed down 0.1%. In Australia, the S&P/ASX 200 lost 0.1% as well.
Italy will not continue its participation in China’s Belt and Road Initiative, which it has been a part of since 2019. Its participation as the only G7 nation in the investment programme expires in March. The programme seeks to increase Beijing’s economic influence around the globe using a network of investment and business connections.
Oil prices dropped on Wednesday and overnight to Thursday, trading near five-month lows, due to concerns about slow growth in China, shaky consensus among OPEC+ members and inventory increases in the US. Oil inventories in the US were up by nearly 600,000 barrels last week, according to data from the American Petroleum Institute. Brent was trading below USD 75 per barrel on Thursday and West Texas Intermediate was below USD 70 per barrel.
The Bank of Canada (BoC) kept rates unchanged on Wednesday for a third meeting in a row. Like most other major central banks, the BoC reiterated that it will not hesitate to act if inflation should not come down from October’s 3.1% annual rate to the BoC’s target of 2%.
Corporate news in focus: Sanofi Research and Development Day, BASF investor update, Microsoft annual shareholders meeting.
Economic data in focus: Swiss unemployment rate (07:45 CET), German industrial production (08:00), euro area gross domestic product (11:00), US weekly initial jobless claims (14:30).
Publisher: LGT Bank (Switzerland) Ltd., Glärnischstrasse 36, CH-8027 Zurich
Editor: Alessandro Fezzi
Source: LGT Bank (Switzerland) Ltd.