The U.S. Dollar Index ended flat this week as employment data met expectations, manufacturing PMI exceeded forecasts, and Powell’s cautious remarks on rate cuts raised the probability of a December 25bps cut to 72%.
The euro was highly volatile, impacted by France's government collapse and political uncertainties, though EUR/USD is set to close higher amid stronger PMI data and growing ECB rate cut expectations, with rumors of a potential 50bps cut.
Gold traded sideways with limited geopolitical risks, while silver outperformed on potential Chinese stimulus, narrowing the gold-to-silver ratio to 84.40. U.S. Treasury yields fell, with the 10-year at 4.17% and the 2-year at 4.15%.
The PMI improved to 49.7 in November from 48.5 in October, signaling the slowest decline in five months. New orders showed slower contraction, boosting hiring, though output remained weak.
The Manufacturing PMI rose to 48.4% in November from 46.5% in October, marking the 8th straight month of contraction. However, the broader economy expanded for the 55th consecutive month.
The ISM Manufacturing Prices subindex dropped to 50.3 in November from 54.8 in October, below forecasts of 55.2. This remains well below the long-term average of 60.43.
In October 2024, job openings rose by 372,000 to 7.744 million, surpassing expectations of 7.48 million. Gains were seen in professional and business services (+209,000), accommodation and food services (+162,000), and information (+87,000), while federal government openings fell by 26,000. Regionally, openings increased in the South (+486,000) and West (+133,000) but declined in the Northeast (-195,000) and Midwest (-52,000). Hires (5.3 million), quits (3.3 million), and layoffs (1.6 million) remained steady.
The November ADP National Employment Report showed the private sector added 146,000 jobs, with annual wages rising 4.8%. The report, based on payroll data from over 25 million workers, offers near real-time employment insights. Chief Economist Nela Richardson noted positive job growth but highlighted weaknesses in manufacturing, financial services, and leisure and hospitality.
The S&P Global US Services PMI for November was revised down to 56.1 from 57 but rose from 55 in October, signaling the strongest sector growth since March 2022. Business activity and new orders increased, driven by reduced uncertainty after the Presidential Election and lower interest rates. However, cautious hiring led to reduced employment and a buildup of outstanding work. Input costs rose sharply, but inflation slowed, with output prices increasing at their slowest in 4.5 years. Firms remained optimistic about future business activity.
The ISM Services PMI fell to 52.1 in November, down from 56 in October and below the expected 55.5, marking the slowest growth in three months. Declines were seen in business activity (53.7), new orders (53.7), employment (51.5), and supplier deliveries (49.5). Inventories (45.9) and backlogs (47.1) also decreased, while price pressures slightly rose to 58.2. Feedback from respondents was neutral to positive, with concerns about seasonality, election outcomes, and tariffs influencing cautious industry outlooks.
The ISM Services Prices PMI subindex in the United States rose slightly to 58.20 points in November 2024, up from 58.10 points in October. Since 1997, the average for ISM Non-Manufacturing Prices has been 59.85 points, with a peak of 84.50 points in December 2021 and a low of 36.10 points in December 2008.
For the week ending November 30, initial unemployment claims rose by 9,000 to 224,000, with the previous week revised up to 215,000. The 4-week moving average increased by 750 to 218,250. For the week ending November 23, the insured unemployment rate fell to 1.2%, with insured unemployed individuals decreasing by 25,000 to 1,871,000. The 4-week moving average dropped by 3,250 to 1,884,250.
In November 2024, average hourly earnings rose 0.4% to $35.61, exceeding expectations of 0.3%. For nonsupervisory employees, earnings increased 0.3% to $30.57. Annual wage growth stood at 4%, slightly above the forecasted 3.9%.
The US added 227,000 jobs in November, exceeding expectations of 200,000. Gains were seen in healthcare, hospitality, government, and social assistance, with transportation equipment manufacturing rebounding as striking workers returned. October’s job gains were revised up to 36,000, reflecting recovery from Boeing strikes and hurricane disruptions.
The unemployment rate rose to 4.2%, with 7.145 million unemployed. The labor force participation rate dipped to 62.5%, and the employment-population ratio fell to 59.8%. Total employment declined by 355,000 to 161.141 million.
The U.S. Dollar Index ended flat, with Powell’s cautious remarks pushing the probability of a 25bps December Fed rate cut to 72%, up 6%.
The euro was volatile due to France's government collapse, while EUR/USD rose amid stronger PMI data and ECB rate cut speculation (25bps, possibly 50bps).
The British pound strengthened despite BoE hints at 2025 cuts, supported by reduced December cut expectations.
USD/JPY edged up as stable wages and hawkish BoJ comments raised the December hike probability to 50-60%, though doubts remain due to weak economic concerns.
The Canadian dollar fell to 1.4030/USD, weighed by GDP growth below the Bank of Canada's 1.5% forecast and renewed U.S. tariff threats.
The offshore yuan held at 7.26/USD on expected Chinese stimulus, while the Australian dollar weakened to 0.64/USD after weak GDP data raised February rate cut speculation.
Gold traded quietly, moving slightly down as the probability of a 25bps Fed rate cut rose by 5%. Limited geopolitical risks, including a de-escalation in South Korea, kept gold range-bound. Silver outperformed on potential Chinese stimulus, narrowing the gold-to-silver ratio to 84.40.
Brent crude closed at $72 per barrel as OPEC+ delayed production increases to April, phasing out cuts over 18 months. The UAE also postponed its 300,000 bpd production hike, reflecting efforts to balance weak demand with rising non-OPEC+ supply.
Last week saw a positive performance across major indices, with new highs being reached. The Nasdaq rose nearly 3%, while the S&P 500 gained 1%. However, the Dow Jones underperformed, experiencing a roughly 1% decline due to profit-taking, which set it apart from the other indices.
Notable gainers for the week included Tesla, Nvidia, Amazon, and Meta, all of which saw increases of over 5%. Apple and Microsoft also saw gains in the range of 3-4%, delivering returns for investors.
On the downside, Intel stood out with a nearly 13% drop, and the broader electronics and technology sector generally underperformed.
Fed Signals, Inflation Data, and Global Trends Reshape Market Dynamics (23 - 27 December)The dollar index hit a two-year high of 108.5 on hawkish Fed signals but eased after core PCE prices rose just 0.1% in November, sparking hopes for disinflation.
November PCE Price Index Reveals Spending Trends (12.20.2024)The PCE price index increased by 0.1% in November, with a similar 0.1% rise when excluding food and energy.
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