UK unemployment rises to 5%

The UK unemployment rate rose by more than expected in the three months to September, increasing to 5%, up from 4.8% the month prior. The weaker labour market conditions appear to be having an impact on pay, with growth in weekly average earnings falling to 4.8% on a 3-month y/y basis, from 5% in August. Growth in private sector pay (excluding bonuses) also slowed, dropping to 4.2% 3-month y/y from 4.4%. The outturn has increased bets on the BoE cutting rates in December, with the odds of a cut rising to over 85% from around 70% on Monday.

The German ZEW sentiment survey of current investor confidence rose marginally, rising to -78.7 in November from a value of -80.0 the month prior. Investor confidence in the future outlook, in contrast, declined on the month, dropping to a value of 38.5 from 39.3. Consensus expectations had been for a rise in the expected conditions index, denting hopes of a turnaround in German business conditions.

A new, more high-frequency, data series from the ADP suggested that the US private sector on average shed 11,250 job a week over the four weeks to October 25.

Today’s Economic Data and Events

• 11:00 TU Current account balance (Sept). Forecast: 1.2bn
• 14:30 IN CPI (Oct). Forecast: 0.4% y/y

Fixed Income

• US markets were closed for the Veteran’s Day holiday.
• Moves in European bond markets were mixed on Tuesday. The 10yr Gilt yield saw a sharp fall, declining over 7bps to reach 4.386.

FX

• The dollar fell against major peer currencies on Tuesday, with the spot index 0.2% lower. EURUSD rose 0.2% to 1.1582, while GBPUSD fell 0.2% to reach 1.315. USDJPY was broadly flat at 154.16.
• In emerging markets, USDTRY fell marginally, declining 0.04% to 42.2187, while USDINR fell 0.15% to 88.5675.

Equities

• US equity markets moves were mixed on the day. The Dow Jones and S&P 500 rose 1.2% and 0.2%, respectively, on the back of optimism about the possible end of the government shutdown. The NASDAQ fell 0.3% as tech shares declined.
• Major European equity markets saw gains on the day. The Eurostoxx 50 rose 1.1%, the FTSE 100 increased by 1.2%, the CAC 40 gained 1.3% and the DAX rose 0.5%.
• In the UAE, the DFM rose 1.1% and the ADX gained 0.2%. The Tadawul rose 0.2%.

Commodities

• Oil prices rose on Tuesday, with Brent futures 1.7% higher at USD 65.16/b and WTI up 0.9% at USD 61.04/b. Markets will be looking ahead to today’s monthly OPEC report, as well as the IEA’s annual energy outlook.
• Gold saw further small gains, buoyed by new ADP data which pointed to a weaker labour market outlook. Gold prices rose 0.3% to USD 4126.85.76/troy oz, while silver gained 1.4% to reach USD 51.2/troy oz.