Jobs report adds more fuel to the equity rally

US equities closed higher on Friday, with the S&P 500 reaching nearly 23-month highs, despite concerns about rising interest rates. The positive sentiment was fuelled by a strong labour market, as the November jobs report exceeded expectations. Energy stocks led the market, and while the 10-year Treasury yield rose to 4.235%, investors remained focused on the favorable outlook for employment. The futures market implied a 45% chance of a Fed rate cut by March, contributing to anticipated volatility over the course of this week amid central bank meetings and key inflation data.  Additionally, the Stoxx 50 index surged to its highest level since May 2007, closing at 4,523 on Friday, propelled by strong job data in the US and investor optimism around the perceived peak in major central bank interest rates. 

Summary for 11.12.2023 

• Most Asian stocks rose cautiously on Monday, influenced by positive cues from Wall Street and recovering Japanese markets. However, Chinese shares plummeted due to persistent disinflation signs, with the central bank meetings in focus, particularly the Federal Reserve’s outlook for 2024. Investors expressed concerns over China’s economic activity as consumer inflation fell sharply, prompting calls for additional stimulus measures. 
• European shares are poised for a subdued opening while US equity remain steady as traders anticipate a data-heavy week.  
• Oil prices edged higher for a second session on Monday, supported by US efforts to replenish strategic reserves and technical chart indicators. Concerns about crude oversupply and softer fuel demand growth persist, with investors remaining sceptical of significant supply drops despite OPEC+ pledges to cut production in the first quarter. 
• US President Joe Biden has invited Ukraine President Volodymyr Zelenskiy for a meeting at the White House on Tuesday to discuss the ongoing conflict with Russia and the importance of continued US support for Ukraine’s defence efforts. The meeting will address urgent needs facing Ukraine, with discussions on defence cooperation and joint projects, according to statements from the White House and Zelenskiy’s office. 
• China’s disinflationary trend deepened in November, as consumer prices fell at their fastest pace in three years and producer prices remained in contraction for the fourteenth consecutive month, raising concerns about the country’s economic health. The weak data, despite continued liquidity injections by the government, underscores the need for Beijing to implement more targeted fiscal measures to support economic activity amid persistent headwinds. 
• The November jobs report showed the US economy adding 199,000 payrolls, with around 50,000 returning workers.  Adjusting for this effect, hiring remained close to October’s figures at around 150,000. The unemployment rate declined to 3.7%, and although month-over-month wage growth exceeded expectations, the year-over-year pace held at 4%, the slowest since the summer of 2021. 
• In December, US consumer sentiment, as measured by the University of Michigan, surged to 69.4, beating expectations and reaching the highest level since August, driven by positive shifts in inflation expectations. Anticipated inflation for the upcoming year dropped to 3.1%, the lowest since March 2021, contributing to the overall improvement in consumer sentiment. 
• The European Union reached a provisional deal on landmark AI rules, positioning itself as a global pioneer in regulating artificial intelligence use. The accord mandates transparency for foundational models like ChatGPT, introduces restrictions on governments’ real-time biometric surveillance, and imposes fines for violations, signalling a historic step in shaping AI governance. 
• An investor group, including Arkhouse Management and Brigade Capital, has made a $5.8 billion offer to take department store chain Macy’s private, offering $21 per share, a 20.76% premium from its closing at $17.39 on Friday. Macy’s, which has discussed the proposal with the group, is yet to indicate its stance on the offer. 
• Apple rose 1% on Friday to just below an all-time high and saw its market capitalization again claw back above $3 trillion. Strength continued after the Wall Street Journal reported that Apple and its suppliers are working to build over 50 million iPhones in India annually within two to three years. If this were achieved, India would account for a quarter of global iPhone production, while China would remain the largest producer.  Meantime, Morgan Stanley raised its target price on the shares to $220. 
• Lululemon reversed earlier losses to rally over 5% on Friday after reporting better-than-expected earnings late Thursday. The company’s guidance came in below the average Wall Street estimate, but several analysts following Lululemon said the company had a strong quarter and may be staying conservative with its estimates. Oppenheimer raised its price target. 
• Global commodities broker Marex Group shifted its IPO plans from London to the New York Stock Exchange, aiming for a valuation exceeding $1.8 billion, a significant increase from the £500 million to £700 million range initially targeted for a London listing. This move aligns with a broader trend of British and European firms favouring US exchanges for more favourable conditions and potentially higher valuations. 
• Broadcom Inc. reported a robust performance in its Q4 fiscal earnings late Thursday, with non-GAAP EPS beating estimates at $11.06, representing a 6.7% increase from the previous year. The company’s net revenues rose by 4.1% to $9.295 billion, driven by strength in the semiconductor solutions, generative AI segments, and networking revenue, with over $14 billion in cash reserves and strong free cash flow. 
• Anglo American’s shares tumbled sharply on Friday as the mining giant announced plans to cut production by about 4% in 2024, aiming to save $1 billion amidst a downturn in platinum prices. The stock closed 19% lower on Friday as market volatility, particularly in the platinum metals sector, prompted the company to implement cost-saving measures, including a reduction in production at key operations in South Africa and Chile. 
• This week, the focus in the United States will be on the Federal Reserve’s interest rate decision, inflation data, and retail sales, while globally, investors will closely monitor central bank updates from the European Central Bank, and Bank of England, along with economic indicators from major economies such as Germany, Japan, and China.