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Investors are buoyed by stronger-than-expected US labor market data, with 227,000 new non-farm jobs created, despite a rise in the unemployment rate to 4.2%. Optimism for a Fed rate cut on December 18 has surged, with an 85.1% probability indicated by the CME Group's "Fed Watch Tool." Meanwhile, political instability in France, following a government crisis, adds to market uncertainties.
US labor market data has sparked speculation about a potential Federal Reserve rate cut, with 227,000 new jobs created, surpassing expectations, while the unemployment rate rose to 4.2%. The "Fed Watch Tool" indicates an 85.1% chance of a 25 basis point cut on December 18. Meanwhile, a government crisis in France adds to market uncertainties as President Macron vows to stay in power despite a no-confidence vote.
The Federal Social Insurance Office has clarified that the inflated AHV financial forecasts were not due to calculation errors but rather methodological shortcomings in the model used. An administrative investigation revealed that two functions had inflated expenditure estimates, leading to implausible forecasts. The report exonerates the involved personnel and emphasizes the need for improved quality control and knowledge transfer to prevent future issues.
Federal Reserve Bank of Cleveland President Beth Hammack indicated that the central bank is "at or near" the point of slowing interest-rate cuts, citing a robust economy and persistent inflation. She supports market expectations for one more rate cut by January and a few additional reductions by the end of next year, while stressing that future decisions will depend on incoming data.
US employers added 227,000 jobs in November, rebounding from previous setbacks due to severe weather and strikes. This increase coincided with a rise in the unemployment rate and higher-than-expected wage growth, nudging the Federal Reserve closer to a potential interest rate cut, though a key inflation report remains a critical factor.
OPEC+ has postponed crude production hikes until April to better assess global demand and economic conditions, extending output cuts until the end of 2026. Saudi Energy Minister Abdulaziz bin Salman emphasized the need for a "reality check" amid fluctuating market sentiments and geopolitical uncertainties. Despite the cautious approach, oil prices have declined, reflecting concerns over sluggish demand, particularly from China.
The US labor market shows signs of slowing job growth, with an expected interest rate cut of 0.25 percentage points to a range of 4.25 to 4.50 percent in December. Despite a decline in labor demand, layoffs are manageable, allowing the Federal Reserve to continue easing rates.
In November, the US economy added 227,000 jobs, but the unemployment rate rose to 4.2%. This job growth was influenced by previous disruptions from hurricanes and strikes, suggesting a more moderate underlying trend of approximately 120,000 jobs. Average hourly wages increased by 4% year-over-year, indicating stable wage growth without signs of overheating, leading to expectations of further interest rate cuts by the Fed in December.
US Treasuries rallied as traders increased their expectations for a Federal Reserve interest-rate cut this month, following a mixed November employment report. Yields on two-year notes fell four basis points to 4.10%, with traders now pricing in approximately 21 basis points of easing at the Fed's December meeting, up from 16 basis points prior to the data release.
The Swiss National Bank (SNB) is expected to announce an interest rate decision soon, with economists predicting a potential cut of 50 basis points due to a deteriorating economic outlook and low inflation. Current inflation stands at 0.7%, well below the target range, while economic growth remains below potential and unemployment is rising. Analysts argue that a significant cut is necessary as the SNB has already set expectations for a rate reduction through its communication strategy.
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