US Payrolls – Still Going Strong
US employment advanced in December by the most in nine months as labor market’s resilience is once again confirmed!
- Non-farm payrolls increased in December by 256’000 units, above market expectation of 165’000
- Unemployment rate fell to 4.1% from 4.2%
- Data caps a surprisingly strong year for labor market, despite high borrowing costs, inflation and political uncertainties
- Figures likely to give further support Fed’s willingness to move more cautiously this year given also the apparent stalling in progress towards 2% inflation goal
- Next up this afternoon the CPI print for December with market expecting a slight pick up to 2.9% year-on-year (from 2.7% a year ago)
30-Year Treasury Surge as S&P Yield Lag
- Treasuries slumped on Friday 10th after the December payrolls data, sending the 30-year yield above 5% for the first time in more than a year, with U.S. Treasuries entering the 6th year of the 3rd Great Bond Bear Market:
Source: BofA
- The dividend yield and earnings yield for the S&P 500 are sitting now 3.7% and 1.15% below what’s offered by 30-year Treasuries respectively, a development last seen in 2002
Oil Jumps on Sanctions, Supply Fears
- Oil surged to a five-month high as new US sanctions on Russia’s energy sector raised concerns about disruptions from one of the world’s largest producers
- The US rolled out its toughest measures yet, targeting major exporters, insurers, and over 150 tankers
- Crude prices have surged this year, driven by colder weather, declining US inventories, and speculation that tighter restrictions on Iranian oil could be on the horizon
- The price spike could pose a dilemma for the Federal Reserve if it contributes to persistent inflation. As a result, investors have tempered expectations for swift interest rate cuts, with the US economy staying resilient and inflationary pressures remaining
No Relief on the Horizon in California
After a short respite over the weekend, strong winds have picked up once again limiting opportunities for firefighters to make progress.
- Estimates for damages and economic losses have been increased to 250 – 275 billion USD, from 135 – 150 billion USD. The number includes direct and secondary losses (lost wages, supply chain disruptions,…)
- Fires are projected to cause over 30 billion USD in insured losses according to first estimates
- Goldman Sachs expects a relatively small hit on non-farm payroll growth in January (15’000-25’000) due to the event with roughly a 0.2% impact on first quarter GDP growth
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