US unemployment rate rises to 4.2% in November

US nonfarm payrolls rose 227k in November, beating expectations of a 220k gain. The print represents a sharp uptick from the October data, which was revised up to a gain of 36k from 12k initially, with the numbers being severely impacted by hurricanes and strike activity. The three-month average for nonfarm payrolls in November was 173k, a level still materially lower compared to earlier in the year. The unemployment rate rose to 4.2% in November, up from 4.1% the month prior.

US consumer confidence, as measured by the University of Michigan sentiment survey, rose to a value of 74 in the provisional December print, up from 71.8 in November. The gain on the month was predominantly due to an improvement in the current conditions index which rose to a value of 77.7 from 63.9 in November. While that may suggest continued strong consumer spending in the short-term, much of the gain in the current conditions component appears to be as a result of a jump in conditions for durable purchases, which may be linked to concerns about the potential price impact of tariffs under the Trump administration. The expectations component in contrast fell to a value of 71.6 in December from 76.9 in November. Expectations for one-year ahead inflation also rose, rising to 2.9% from 2.6%.

The Reserve Bank of India elected to keep the policy rate unchanged at 6.5%, for an 11^th consecutive meeting, despite weaker growth in the third quarter. The decision in favour of maintaining the current rate was likely driven by inflation breaching the 2% to 6% target in October. The committee did however cut the cash reserve ratio to 4% from 4.5%, which should increase liquidity.

German Industrial Production fell 1.0% m/m in October, well below consensus expectations for a 1.0% gain. The September outturn was revised upwards, to a 2% m/m decline from an initial 2.5% fall. The weak print was largely as a result of lower energy production and automotive industry activity.

Consumer prices in China rose just 0.2% y/y in November, weaker than consensus expectations for a 0.4% gain and below the 0.3% rise the month prior. The fall in headline inflation was largely driven by lower food prices, with core inflation actually ticking up marginally to 0.3% y/y on the month.

Today’s Economic Data and Events

• No significant data releases.

Fixed Income

• US treasury yields fell on Friday, with markets interpreting the rise in the US unemployment rate as a further justification for a rate cut at the December Fed meeting. The 2yr yield fell 4bps on the day, to a value of 4.1039%. On a week-on-week basis the 2yr yield was 5bps lower. The 10yr yield fell by a more muted 2bps, both on the day and on a week-on-week basis, to a value of 4.1529%.
• There were also falls in longer-dated bond yields across the majority of European economies on Friday.

FX

• The dollar ended the day stronger against a basket of peer currencies on Friday, despite a rise in the unemployment rate, after the University of Michigan sentiment survey rose by more than expected. EURUSD fell by 0.17% to 1.0568 and GBPUSD declined 0.12% to 1.2744. USDJPY was broadly unchanged on the day, gaining just 0.07%, remaining close to 150.
• Commodity currencies were also weaker against the dollar at the end of the week, AUDUSD fell 0.96% to 0.6391, NZDUSD declined 0.93% to 0.5831, and USDCAD gained 0.96% to 1.4157.

Equities

• The November US jobs data fueled a further gain in both the S&P 500 and NASDAQ on Friday, rising 0.25% and 0.81%, respectively. The move saw the S&P 500 reach a new all-time high, leaving the index up 3.34% on a week-on-week basis. The Dow Jones in contrast fell 0.28% on Friday, ending the week 0.6% lower.
• European markets were generally up on the day. The Euro Stoxx 50 index gained 0.53%, the CAC 40 rose 1.31% and the DAX increased by 0.13%. The FTSE fell 0.49%.
• Local markets were mixed with the DFM higher by 0.7%, while the ADX closed 0.1% lower.

Commodities

• Oil markets continued to be concerned about a glut in oil supply in coming quarters, despite the recent OPEC+ decision to postpone production increases. Brent futures fell 1.35% to USD 71.12/b while WTI was lower by 1.6% at USD 67.2/b. Prices have however ticked up in early morning trade, with rising geo-political tension over the weekend.