The S&P 500 Index gained +0.25%, the Dow Jones Industrials Index increased by +0.07%, and the Nasdaq 100 Index saw a rise of +0.25%.
This morning, the Bureau of Labor Statistics delivered a jobs report for December that surpassed expectations. Nonfarm payrolls for Dec rose by +216,000, exceeding the anticipated +175,000. Additionally, the unemployment rate for Dec remained steady at 3.7%, defying expectations of an increase to 3.8%.
Average hourly earnings for Dec recorded a +0.4% month-on-month and +4.1% year-on-year increase, surpassing expectations of +0.3% month-on-month and +3.9% year-on-year.
In Europe, stocks faced a downturn as the Euro Stoxx 50 hit a 1-month low. This occurred alongside a climb in European government bond yields to 3-week highs following an acceleration in Eurozone Dec CPI from Nov, reducing the likelihood of ECB easing monetary policy.
Market sentiments discount the chances of a -25 basis points rate cut at 3% for the upcoming FOMC meeting on Jan 30-31 and 54% for the subsequent meeting on March 19-20.
Both U.S. and European government bond yields rose today. The 10-year T-note yield reached a 3-week high of 4.097%, up +7.0 basis points at 4.069%. Meanwhile, the 10-year German bund yield climbed to a 3-week high of 2.217%, rising +6.9 basis points to 2.193%, and the 10-year UK gilt yield rose to a 3-week high of 3.852%, up +9.9 basis points at 3.826%.
Overseas stock markets exhibited mixed performance, with the Euro Stoxx 50 down -1.01%, China’s Shanghai Composite Index closing down -0.85%, and Japan’s Nikkei Stock Index closing up +0.27%.
The Euro Stoxx 50 experienced a decline to a 1-month low due to reduced expectations for ECB rate cuts, influenced by Eurozone consumer prices accelerating in December. Economic concerns also impacted stocks after a larger-than-expected fall in German Nov retail sales. Furthermore, European liquor stocks retreated today following China’s launch of an anti-dumping investigation into EU products, leading to more than a -5% slump in Remy Cointreau SA and Pernod Ricard SA.
Eurozone Dec CPI rose +2.9% year-on-year from +2.4% in Nov, meeting expectations. Dec core CPI eased to +3.4% year-on-year from +3.6% in Nov, in line with expectations and marking the smallest increase in 21 months. German Nov retail sales fell -2.5% month-on-month, weaker than the expected -0.5%, representing the most substantial decline in 19 months.
Swaps indicate a 5% probability of a -25 basis points rate cut by the ECB at its next meeting on January 25 and a 48% chance for the following meeting on March 7.
China’s Shanghai Composite Index reached a 1-week low and closed moderately lower today. A prolonged housing slump and weakness in manufacturing activity are influencing market sentiment, dragging down Chinese stock prices. Pressure on automakers intensified as only four of 13 Chinese automakers met their 2023 sales targets, indicating fierce market competition. Chinese technology stocks also faced pressure, contributing to the overall market decline.
On a positive note, Chinese lithium, EV battery, and charging-related stocks rose after the government announced a plan to strengthen the development of new energy vehicles and charging infrastructure. Additionally, Chinese robotics-related companies saw gains following the government’s commitment to developing a batch of emergency robots by 2025.
Japan’s Nikkei Stock Index closed moderately higher, driven by improved market sentiment. The Japan Dec consumer confidence index rose more than expected to a 2-year high. A decline in the yen to a 3-week low against the dollar boosted export stocks, lifting the overall market. Japanese retailers saw gains on strong December sales. Real estate stocks also rose, following a Morgan Stanley report suggesting Japanese real estate stocks could gain favor as investors focus on inflation. However, Japanese providers of chips for the automotive industry faced declines after Mobileye’s plunge on Thursday, forecasting 2024 revenue well below market expectations.
The Japan Dec consumer confidence index rose +1.1 to a 2-year high of 37.2, surpassing expectations of 36.5. The Japan Dec Jibun Bank services PMI was revised downward by -0.5 to 51.5 from the initially reported 52.0.
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