U.S.:
Strong U.S. job growth in November bolsters economy’s outlook
U.S. job growth increased at a strong clip in November, painting a portrait of a healthy economy that analysts say does not require the kind of fiscal stimulus that President Donald Trump is proposing, even though wage gains remain moderate. Nonfarm payrolls rose by 228,000 jobs last month amid broad gains in hiring as the distortions from the recent hurricanes faded, Labor Department data showed on Friday. The government revised data for October to show the economy adding 244,000 jobs instead of the previously reported 261,000 positions. November’s report was the first clean reading since the storms, which also impacted September’s employment data. Average hourly earnings rose five cents or 0.2 percent in November after dipping 0.1 percent the prior month. That lifted the annual increase in wages to 2.5 percent from 2.3 percent in October. Workers also put in more hours last month. The unemployment rate was unchanged at a 17-year low of 4.1 percent amid a rise in the labor force. Economists polled by Reuters had forecast payrolls rising by 200,000 jobs last month.
U.S. Consumer Sentiment Cools for a Second Month
Consumer sentiment in the U.S. cooled for a second month while remaining around levels consistent with a steady economy and solid job market, according to a University of Michigan report Friday.
Highlights of Michigan Sentiment (December, preliminary)
- Sentiment index fell to 96.8, lowest since Sept. (est. 99), after 98.5 in Nov.
- Current conditions gauge, which measures Americans’ perceptions of their finances, rose to 115.9 from 113.5
- Expectations measure decreased to 84.6 from 88.9
- Year-ahead inflation expectations rose to 2.8%, highest since April 2016, from 2.5%
Key Takeaways
Even with the decline in the main index and a higher inflation outlook, Americans remain relatively optimistic about employment prospects and the economic outlook, with the report showing improved household finances. Upbeat moods help to underpin consumer spending, the biggest part of the economy. Buying conditions for vehicles and household durables benefited from favorable prices and discounts, while the outlook for home buying remained favorable on low mortgage rates and greater income security.
Europe:
Germany-U.S. yield gap near 8-month high as central bank meetings loom
The gap between benchmark German and U.S. 10-year bond yields was close to its widest since April on Monday as the fiscal and policy paths of two of the world’s most important economies diverge. Monetary policy-setters for both countries are due to meet this week and though both economies are on the mend, the paths are expected to deviate as U.S. President Donald Trump pushes a tax overhaul that could put the world’s largest economy at risk of overheating. As a result, investors are starting to price in multiple rate hikes from the U.S. Federal Reserve in 2018, after an almost-certain hike this week. While pressure from the divergence is most pronounced at the short end of the yield curve — the U.S. Treasury curve is close to its flattest in a decade — longer-dated yields are also being impacted, particularly after the risk of a U.S. government shutdown last weekend was averted. “Political risks are capping U.S. Treasury yields at the long end but …three rate hikes (are still) expected next year,” said DZ Bank strategist Rene Albrecht. “The contrary is true for the euro zone. The tendency is for lower rates and I expect government bonds to consolidate at these levels going into the year end.”
Asia:
China’s banks dole out record credit in 2017 as Nov loans blow past forecasts
Bank lending in China hit a fresh record after a much stronger-than-expected surge in credit in November, even as authorities step up efforts to reduce risks in the financial system from a rapid build-up in debt. Chinese banks extended 1.12 trillion yuan ($169.27 billion) in net new yuan loans in November, data from the People’s Bank of China showed on Monday, well above analysts’ expectations. Analysts polled by Reuters had predicted new yuan loans would rise to 800 billion yuan, from October’s 663.2 billion yuan. The November figure was well above the highest forecast in the poll. “New loans exceeded expectations due to strong corporate financing demand, with medium- and long-term corporate and household loans expanding sharply,” Zheng Lianghai, an analyst at Caitong Fund Management said. Analysts also attributed the jump in new loans to an ongoing regulatory crackdown on off-balance sheet lending, which is forcing banks to issue more formal loans, and to a recent rout in China’s bond markets which has made it tougher for companies to raise money by issuing bonds.