ADP private sector payrolls fall in November

The ADP measure of the change in US private-sector payrolls fell unexpectedly in November, declining by 32k, the largest drop since early 2023. Consensus expectation had been for a gain of 10k. The November decline partially offsets the 47k rise in private payrolls seen in October. While the fall was broad-based across sectors there was a marked difference across firms of different sizes, with small firms seeing much larger declines but firms with over 500 employees seeing a rise in payrolls.

The US ISM services index rose marginally in November, increasing to a value of 52.6 from 52.4 in October, a nine-month high. Underlying the headline measure was a fall in new orders, which was offset by a rise in delivery times, inventory and employment. Encouragingly, while the prices-paid component remains elevated it did fall to a seven-month low of 65.4 from 70 in October.

US industrial production rose 0.1% m/m in September, up a little from a downwardly revised 0.3% fall in August. Manufacturing output, which accounts for the bulk of headline industrial production, stalled on supply-chain difficulties amongst vehicle manufacturers.

Inflation in Türkiye rose by 31.07% y/y in November, down from almost 33% a month earlier and slower than markets had been expecting. Food and housing prices were the primary contributors to inflation in November with food prices up 27% y/y and housing costs nearly 50% higher. On a monthly basis, consumer prices rose by 0.9%, down from 2.6% a month earlier and the slowest pace of month/month increase since May 2023. Producer prices ticked up moderately to 27.2% y/y in November, up from 27% a month earlier.

Today’s Economic Data and Events

16:30 US Challenger job cuts (Nov)

17:30 US initial jobless claims (w/e Nov 29): forecast 220k

Fixed Income

• US treasuries rallied on Wednesday, driven by worse-than-expected ADP employment data. Both the 2yr and 10yr yield fell 2bps to 3.4835% and 4.0633%, respectively.
• Moves in European bond market yields were mixed on the day. UK 10yr Gilt yields fell just over 2bps to 4.446%.

FX

• The dollar spot index fell in response to the ADP private-sector payrolls data, declining 0.5% against a basket of major peer currencies. EURUSD gained 0.4% to 1.1671, while both USDJPY and USDCHF fell 0.4% to 155.25 and 0.7996, respectively. GBPUSD saw a large rise, gaining over 1.1% to 1.3353.
• Commodity currencies were also stronger against the dollar on the day. AUDUSD rose 0.7% to 0.6601, NZDUSD rose 0.7% to 0.5774 and USDCAD fell 0.1% to 1.395.
• In emerging markets, USDTRY rose 0.2% to 42.443 and USDEGP rose 0.1% to 47.5867. USDINR rose 0.4% to 90.1913, as delays to signing a trade deal hurt sentiment.

Equities

• US equity markets rose on Wednesday, with the ADP data surprise adding to the argument for a Fed cut next week. The Dow Jones rose 0.9%, the S&P 500 gained 0.3% and the NASDAQ increased by 0.2%.
• Moves in European stock markets were muted. The Euro Stoxx 50 and CAC 40 both gained 0.2%, while the FTSE 100 and DAX both fell 0.1%.
• Locally, the DFM gained 1.2% and the ADX rose 1.8%. The Tadawul rose 0.4%.

Commodities

• Oil futures saw small gains, with markets focused on geo-political tensions, including Russia-Ukraine and US-Venezuela. Brent rose 0.4% to reach USD 62.67/b, and WTI gained 0.5% to USD 58.95/b. The EIA reported a 574k barrels rise in US crude inventories last week.
• Gold prices fell by less than 0.1% to USD 4,203.08/troy oz, while silver rose 0.05% to USD 58.5/troy oz.