LONDON, Dec 4 (Reuters) – By Marc Jones, global markets correspondent
What matters in US and global markets today
It appears the U.S. economy is experiencing some pain and the dollar is among the assets that have fallen most as it heads for its 10th straight day of declines and its biggest annual drop since 2007. Talk of who could be the next Federal Reserve chair may be playing a part, but given current Chair Jerome Powell is expected to cut rates again next week, economic data is too.
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Today’s Market Minute
Odd jobs and bonds
Wall Street looks set for an uneventful restart, but traders will get two more jobs market indicators shortly – U.S. weekly initial jobless claims and the Challenger job cuts report, plus earnings from Kroger, Dollar General and Hewlett Packard Enterprise. [.N] They come hot on the heels of Wednesday’s negative 32k ADP employment print for November. It was negative in September, August and June too, whereas there were no negative prints in the whole of 2024. Given non-farm payrolls won’t be coming on Friday or even before next Wednesday’s Fed decision (blame the shutdown again), the Challenger report could be particularly closely watched. Last month’s version showed a big surge in layoffs, albeit negated in the end by low jobless claims right through that month. Stratospheric AI and tech firm valuations are likely to remain a focus too after Wednesday’s tumble in Microsoft’s shares on a report, later denied, that it had cut AI software sales quotas. [.N] Over in China, the central bank set its official yuan fixing at 7.0733 per dollar earlier, significantly weaker than estimated. In the bond market, U.S. Treasuries are trading in a tight 4% to 4.1% range. Meanwhile, Japan’s 30-year bonds rallied after an overnight auction attracted the highest demand since 2019 as investors lapped up higher interest rates. That bumper demand also followed a successful sale of 10-year debt earlier in the week. However, the rally at the long end seems to have been funded from elsewhere in the curve with the 10-year yield rising nearly 4 basis points. Meanwhile in Europe, the debate over using frozen Russian central bank reserves to fund Ukraine continues to throw up plot twists. EU leaders will make a final decision on their “reparations loan” plan by December 18. If no deal can be struck, Ursula von der Leyen has said the bloc will resort to joint debt issuance, as it did during the COVID-19 pandemic. There’s also the Fed’s favored PCE inflation data coming on Friday. Once that’s out, the Fed, and investors, will have all the key data they are going to get before next week’s meeting. Fed policymakers are in their traditional quiet period ahead of the meeting, so no more public guidance is expected before then although the Fed’s Bowman will speak on regulatory issues later, which might be worth listening out for too.
Chart of the day
The dollar’s struggles mean it is currently heading for its biggest calendar year drop since Great Financial Crisis began to tear through world markets and prompted cuts in U.S. interest rates in 2007.
That has all kinds of implications, most bluntly geopolitics, U.S. inflation and the spending power of citizens and firms abroad, as well as where investors put their money. Despite all the strife about tariffs this year, Europe, Latin America and emerging markets more generally have all benefited. Investors have poured in money into assets like local currency emerging market sovereign bonds at a rapid rate meaning those from Brazil, South Africa and Mexico have provided stellar returns of between 34% and 40% .
Today’s events to watch
* U.S. November Challenger Job Cuts report * U.S. weekly initial jobless claims * U.S. Weekly Natural Gas Storage * Earnings: Kroger, Dollar General and HPE
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(By Marc Jones; Editing by Anna Szymanski and Emelia Sithole-Matarise)
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