Strong US jobs, wages growth expected in December

The war in Ukraine has tended to increase uncertainty regarding inflation and growth prospects. When and with what consequences this war will end is pure speculation, but capital markets are expected to build a certain immunity to the headline risks in the coming weeks. The medium- to long-term consequences, on the other hand, could be significant. It is possible that we are at the beginning of a new bloc formation or a new Cold War. This would put a significant damper on globalization and further fuel higher structural inflation. 

US equities closed lower on Thursday as the market continued to speculate as to how long the Fed will keep its monetary policy tight. Jobs data pointed to a tight labour market, as the ADP Employment Change Report came in higher than expected, and jobless claims were lower than anticipated, which seemed to be solidifying expectations of further rate hikes. Services sector data also came out, with the output being revised higher but continuing to depict contraction. The Dow Jones Industrial Average decreased by 1.0% to 32,930, the S&P 500 Index fell 1.2% to 3,808, and the Nasdaq Composite went down by 1.5% to 10,305. Meantime, shares in Europe were mixed following a three-session winning streak to begin 2023, which appeared to be bolstered by signs of easing inflation pressures and unusually warm winter weather that has eased energy crisis concerns. 

Summary as at 06.01.2023 

• Asian equity markets rose slightly on Friday with shares in Australia, Japan, South Korea, Hong Kong and mainland China all on the rise. 
• European shares are on course for gains this morning while US equity futures also rose slightly as investors look ahead to the jobs report. 
• Oil prices extended gains on Friday after official data showed that fuel inventories declined sharply last week following a winter storm in the US. EIA data showed that US distillate stocks, which include diesel and heating oil, fell by 1.427 million barrels last week despite forecasts of a milder 395,000 barrels drop. 
• The ADP Employment Change Report published yesterday showed private sector payrolls in the US rose by 235,000 jobs in December, above forecasts calling for a 150,000 gain, while the prior month’s figure was upwardly revised to a 182,000 increase. The report, which does not include government hiring and firing, comes ahead of today’s broader December nonfarm payroll release, expected to show headline employment rose by 200,000 and private sector job growth increased by 183,000 jobs. 
• In other US employment news, weekly initial jobless claims came in at a level of 204,000 for the week ended December 31, below estimates of 225,000 and compared to the prior’s week downwardly revised 223,000 stories. 
• The US and Germany will send armoured vehicles and an additional Patriot air defence system to Ukraine, the leaders said Thursday in a joint statement. Meantime, Russian President Vladimir Putin ordered his forces to cease fighting in Ukraine for 36 hours starting Friday at noon, Moscow time, but Kyiv quickly dismissed the move as a ploy. 
• Samsung profits dropped by the most in over a decade, indicating that the global economic slowdown may be hurting electronics demand even more than anticipated. The company has been grappling with weak demand for memory chips, smartphones and displays as consumers tamp down holiday spending amid soaring interest rates and inflation.   
• Exxon Mobil Corporation reported yesterday that Q4 earnings would be mixed as lower oil and natural gas prices will negatively impact its profits. However, strength in its refining business will provide an offset. 
• T-Mobile US Inc rose on Thursday after the wireless carrier announced preliminary Q4 customer results. It expects net phone customer additions of 927,000, up from 854,000 in Q3, and slightly above expectations. However, its new high-speed broadband subscribers came in modestly below estimates.