The Job Market is Weakening…

Thoughts of the Day

US JOLTs Jobs Opening data for October revealed a significant slowdown in job availability, dropping to 8.733 million (EXP 9.3 million). This marks the lowest since March 2021, with September’s 9.553 million revised lower to 9.35 million.

The confidence that we have already seen the last US Federal Reserve interest rate hike for this cycle continues to grow.

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Day Ahead

The US ADP Employment Change is expected to show +128k jobs being added to the economy in November, an increase from +113k previously.

The Bank of Canada is expected to keep interest rates at 5% in its monetary policy decision.

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What Happened Yesterday

Market Movements as of New York Close 5 Dec 23
  • The Reserve Bank of Australia kept interest rates at 4.35% in its monetary policy meeting as expected. The committee added that it will closely monitor the global economy and that whether further tightening is needed will depend upon the data and the assessment of risks.
  • The US JOLTS job openings contracted to 8.733M in October (vs 9.3M expected) from 9.553M previously. This level is the lowest since March 2021. The labour market continues to moderate as the effect of the Federal Reserve interest rate hikes trickle through the economy.
  • The US Treasury Yield curve inversion widened to 0.39% as the US 2-year bond yield fell -0.07% to 4.57% while the 10-year bond yield decreased -0.10% to 4.18%.
  • Following the weakened risk sentiment from the previous New York session, stock futures traded slightly weak through the Asian and London trading hours with the S&P 500 futures down -0.24% before the New York session began.
  • The US stock market opened lower from Monday. It then started to rise following the weaker than expected JOLTS data. However, risk sentiment waned a little. Consequently, the S&P 500 closed -0.06% lower (high: +0.19%, low: -0.48%), the Dow Jones slipped -0.22% (high: -0.11%, low: -0.53%) while the Nasdaq rose +0.24% (high: +0.58%, low: -0.50%).
  • The crypto market remains strong with Bitcoin rising +4.94% and Ether rising +2.28%. Cryptos continue to power ahead while most other risk assets remain within recent ranges. Expect more media attention on this as the trend continues.
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Headlines & Market Impact

US service sector picks up in November – ISM

Notable Snippet: The U.S. services sector picked up in November amid an increase in business activity, although new orders remained flat and a gauge of input inflation dipped as the lagged effects of higher interest rates start to have a greater impact.

The Institute for Supply Management (ISM) said on Tuesday that its non-manufacturing PMI rose to 52.7 in November from 51.8, which was a 5-month low.

A reading above 50 indicates growth in the services industry, which accounts for more than two-thirds of the economy. Economists polled by Reuters had forecast the index edging up to 52.0.

There were encouraging green shoots for policymakers. A measure of new orders received by services businesses was 55.5 last month, unchanged from October, while a measure of prices paid for services businesses for inputs dipped to 58.3 from 58.6 in October.

Consumer spending rose moderately in October, while the annual increase in inflation was the smallest in more than 2-1/2 years, government data showed last Thursday. So-called super core inflation, which is Personal Consumption Expenditures services excluding energy and housing, rose 0.1% after increasing 0.4% in the prior month

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Moody’s cut China’s credit outlook to negative on rising debt risks

Notable Snippet: Ratings agency Moody’s downgraded its outlook on China’s government credit ratings to negative from stable, expecting Beijing’s support and possible bailouts for distressed local governments and state-owned enterprises to diminish China’s fiscal, economic and institutional strength.

Moody’s though retained China’s “A1” long-term rating on the country’s sovereign bonds, while expecting China annual GDP growth to slow to 4% in 2024 and 2025 and average 3.8% from 2026 to 2030.

Structural factors including weak demographics will drive a decline to 3.5% by 2030, it said.

The move underscores concerns over rising debt levels and the impact on broader growth in the world’s second-largest economy as Beijing resorts to fiscal stimulus to support local governments and contain the spiralling debt crisis among the country’s property developers.

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Apple’s market cap closes above $3 trillion

Notable Snippet: Apple’s market cap closed at about $3 trillion for the first time since August after its shares climbed 2% to $193.42 per share on Tuesday.

Apple’s value officially crossed the $3 trillion mark for the first time in June, and briefly touched $3 trillion in December 2022 during intraday trading. Apple stock hit its all-time high July 31 and it remains the most valuable publicly traded U.S. company.

The milestone is a sign of Apple’s durability — the iPhone maker’s stock price has risen over 48% so far this year — even as the company reduces its total share count through buybacks.

Investors see Apple as a fortress with significant cash flow, globally popular products and strong shareholder return programs, even as the company struggles with slowing growth and problems in markets such as China.

In Apple’s fiscal 2023, which started in October, Apple reported $383.29 billion in total revenue, down about 3% from the prior year.

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Phan Vee Leung
CIO & Founder, TrackRecord