US JOLTs job openings fall to multi-year low

There was more softer labour market data from the US yesterday, as the JOLTS measure of job openings fell to 8.7mn, down from (a downwardly revised) 9.4mn in October and missing the predicted 9.3mn. This marked the lowest reading for the index since March 2021 and the decline was spread across all sectors, suggesting a wider slowdown. With the ADP and NFP jobs reports also due this week, further softening in these data sets could raise bets that the Fed’s next move will be a cut. Not all the US data has been weaker, however, as the ISM services index released yesterday picked up to 52.7 in November, up from 51.8 the previous month and beating expectations of 52.3. Consumer demand for services has been especially robust since the pandemic despite the Fed’s aggressive tightening, but with pandemic savings dissipating, student loan repayments restarting, and an apparent softening in the labour market, this could start to fade.

French industrial production contracted 0.3% m/m in October, an improvement on the 0.6% contraction logged in September, but falling short of the predicted 0.2% growth and marking the third consecutive decline as the major Eurozone economies continue to struggle with weak industrial sectors. Manufacturing rose 0.1% m/m but contractions in the energy and equipment goods sectors dragged the headline measure down. Yesterday also saw the final PMIs for the Eurozone published, which showed a modest upgrade from the flash estimate (the composite was revised upwards to 47.6, from 47.1 previously and compared with August’s 46.5) but still indicating a fall in economic activity. Germany reports its factory orders for October later today in another gauge of the strength of the Eurozone’s industrial sector.

Australia recorded real GDP growth of 0.2% q/q in Q3, down from Q2’s 0.4% and missing expectations of a 0.5% expansion. Monetary tightening by the RBA has started to have the desired effect in dampening consumer demand as household consumption was flat q/q, while new dwelling construction fell 0.3%.

Today’s Economic Data and Events

• 11:00 Germany factory orders, October, % m/m. Forecast: 0.2%
• 19:00 Bank of Canada rate decision. Forecast: 5.00%

Fixed Income

• The softer JOLTS numbers from the US raised bets that the Fed is done with tightening once again, leading to a boost of USTs. Yields on the 10yr fell 9bps on the day to 4.1649%, while the 2yr dipped 6bps to 4.5767%.
• Similarly in the UK, 2yr gilt yields dropped 10bps to 4.514%, while the 10yr ended 17bps lower at 4.025%, levels last seen in May 2023.
• Ratings agency Moody’s cut its China sovereign bonds outlook to negative yesterday, while keeping the long-term rating at A1. The company cited the Chinese government’s use of stimulus in order to prop up local governments, alongside the ongoing property downturn, as posing risks.

FX

• The dollar index closed up 0.3% against its basket of currencies yesterday, a two-week high for the index and triggered by the rally in bonds.
• The dollar’s gains were broad-based, with the AUD a notable loser ahead of its disappointing GDP print as it lost 1.0% against the greenback to 0.0068. EUR dropped 0.4% to 1.0797 while GBP fell 0.3% to 1.2595.
• An exception was the JPY which picked up marginally, adding 0.04% to 147.15.

Equities

• There was heavy selling in East Asian equity markets yesterday, with a better-than-expected Caixin services PMI for China failing to boost sentiment there as the Hang Seng dropped 2.1% while the Shanghai Composite ended 1.7% lower. In Japan the Nikkei closed down 1.4%.
• There was little concrete direction in the US as observers await the major jobs reports due over the rest of the week. The NASDAQ added 0.3% but the S&P 500 dropped 0.6% and the Dow Jones closed 0.2% lower.

Commodities

• Crude oil prices dropped for the fourth day running yesterday, with Brent futures falling 1.1% to close at USD 77.2/b. WTI closed 1.0% lower at USD 72.3/b.
• Markets remain sceptical over the commitment of OPEC+ members to the voluntary cuts extension announced last week, despite assurances from the Saudi Arabian oil minister yesterday. Supply still appears strong, with the weekly API report showing that US crude stockpiles rose by 594,000 bbl.