Shaw and Partners

Wall Street saw another week of fresh highs, with labour market data in focus. On Friday, the November non-farm payrolls data was released, whereby 227,000 jobs were added, slightly higher than expectations and an improvement October’s upwardly revised 36,000. Meanwhile unemployment ticked slightly higher to 4.2%. Investors welcomed the report, and it supported expectations that the Federal Reserve would cut rates by 25 basis points at its December meeting. Earlier in the week, comments from Fed governor Christopher Waller indicated that he was in support of a coming cut.

For the week, the S&P 500 added 1% to end at a record high. Sector performance was mixed, with consumer discretionary, communication services and information technology seeing strong gains, while other sectors were in the red, with the more value-tilted sectors like energy and utilities lagging. The Nasdaq Composite climbed 3.3% for the week, also ending at a fresh record, while the Dow Jones Industrial Average dropped 0.6%, slipping from a record high. Treasury yields edged lower, dipping after the release of the non-farm payrolls report. The yield on the 10-year Treasury note ended at 4.15%.

One of the notable events of the week was the collapse of the French government. Following growing tensions over the proposed 2025 budget of spending cuts and tax hikes to tackle the deficit, the far-right National Rally and left-wing New Popular Front brought forward a no confidence vote. 331 lawmakers in the 577 member voted in favour of ousting the government, with Prime Minister Michel Barnier resigning on Thursday. Despite the political uncertainty, France’s CAC 40 ended 2.7% higher. Gains were also seen across Europe, with the STOXX 600 2% higher and on a seven-session winning streak.

Political instability was also unexpectedly seen in South Korea. On Tuesday, President Yoon Suk Yeo declared martial law, citing threats to democracy, only to quickly reverse his decision after a sharp backlash. This prompted opposition parties to call for his impeachment and the crisis could potentially impact its international relations. For the week the Kospi fell 1.1%. Elsewhere in the Asia Pacific region, Japan’s Nikkei 225 added 2.3%, helped by a weakening of the yen. Meanwhile, Chinese markets advanced on hopes for additional stimulus measures, ahead of its Central Economic Work Conference this week which will set the agenda for the next year. Both the Hang Seng and Shanghai Composite added 2.3%.

Weekly macro highlights

US non-farm payroll employment rises in November

US non-farm payroll employment rose by 227,000 in November, according to data published by the Bureau of Labor Statistics (BLS). The data was above market expectations for a 200,000 increase and the upwardly revised 36,000 recorded in October. The change in total non-farm payroll employment for September was revised up by 32,000 meaning that combined with the 24,000 upward revision to October’s data, employment in September and October is 56,000 higher than previously reported. Driving the job gains in November were respective increases of 54,000, 53,000 and 33,000 in healthcare, leisure and hospitality, and government. The household survey data collected by the BLS showed a 355,000 decrease in employed persons, well below the 227,000 increase reported in the establishment survey. This reflected a contraction of the labour force by 193,000 persons and the number of unemployed persons rising by 161,000. As a result, the unemployment rate rose from 4.1% to 4.2% in November.

Reserve Bank of India leaves rates unchanged in December

The Reserve Bank of India (RBI) left the policy repo rate unchanged at 6.5% at its Monetary Policy Committee (MPC) meeting on 06 December. Inflation rose to 6.2% year-on-year (YoY) in October, outside the RBI’s 2-6% target range for the first time since August 2023. The RBI expects inflation to fall back within its target range over the remainder of the 2024-25 financial year. India’s central bank has a mandate to maintain price stability while keeping in mind the objective of growth. Gross domestic product growth slowed to 5.4% YoY between July and September, below the 7.0% forecast by the RBI at its October meeting. With inflation expected to ease over the coming months, the MPC’s policy decisions will begin to more evenly reflect both elements of its mandate. This was illustrated by the decision to inject more liquidity into the economy by reducing the required cash reserve ratio held by banks from 4.5% to 4.0%.

China’s Caixin manufacturing PMI rises in November

The Caixin China manufacturing Purchasing Managers’ Index (PMI) rose from 50.3 in October to 51.5 in November, further above the 50 level that separates expansion and contraction. November’s data was above market expectations for an increase to 50.5 and represented the fastest rate of expansion since June. The output PMI subindex rose from 51.8 to 53.2, recording its thirteenth consecutive month of expansion. This was supported by improving demand conditions, with the new orders PMI subindex rising from 50.7 to 52.9. Part of the strength in new orders reflected a renewed rise in export orders, with survey respondents noting that some customers were stockpiling following the US election and the potential for higher tariffs on Chinese goods as a result. Firms remained cautious about the outlook, highlighted by the employment PMI subindex remaining in contraction for the third consecutive month, though the rate of job shedding slowed as the index rose from 47.6 in October to 48.3 in November.