Date: December 5, 2018
U.S. Job Market’s Strength May Surprise Investors on Friday
Investors primed for moderation in the U.S. labor market may be surprised by the strength of November’s jobs report, though some cooling is still likely in 2019. Seasonal, weather and industry factors are set to prop up the employment and wage figures due Friday from the Labor Department. Some Americans returned to work following hurricanes in the prior two months, while retail and related industries probably hired aplenty for what’s expected to be a strong holiday-shopping period. Also, Amazon.com Inc.’s Nov. 1 wage hike may help pay. Investors primed for moderation in the U.S. labor market may be surprised by the strength of November’s jobs report, though some cooling is still likely in 2019. Seasonal, weather and industry factors are set to prop up the employment and wage figures due Friday from the Labor Department. Some Americans returned to work following hurricanes in the prior two months, while retail and related industries probably hired aplenty for what’s expected to be a strong holiday-shopping period. Also, Amazon.com Inc.’s Nov. 1 wage hike may help pay. “We’re not falling off a cliff,” said Scott Anderson, chief economist at Bank of the West. “In fact, we’re expecting to see pretty good wage growth in these numbers. It’s still a very decent job market out there.” While the broader economy may be starting to manifest signs of a slowdown, “that’s not going to show up in Friday’s payroll numbers,” he said. While the median estimate of economists for a November gain of almost 200,000 jobs is below October’s 250,000, that’s still more than healthy and in line with the average of the past two years. Average hourly earnings are projected to advance 3.1 percent from a year earlier for a second straight month, after topping 3 percent for the first time in nearly a decade. The unemployment rate probably held at 3.7 percent, the lowest since 1969.
Italian Bond Yields Fall to Five-Month Low as Budget Hopes Grow
Italian bonds rallied on mounting optimism for a positive end to the country’s budget spat with the European Union. The yield on two-year yields fell to their lowest level in almost five months as Italy’s leaders signaled a more conciliatory stance over criticism of their plans to raise the nation’s deficit above EU limits. The recent haven bid for German Bunds and a slide in global equities also helped to make returns on the Mediterranean country’s securities more alluring for investors. “Yields in Italy look much more attractive” than Bunds, said Marc Ostwald, a global strategist at ADM Investor Services. “With equities and credit in the proverbial dog house, those yields look even more enticing.” Italian two-year bond yields dropped as much as 11 basis points to 0.56 percent, the lowest since July 19. The country’s 10-year yield spread with Bunds, a key barometer of risk sentiment, dropped seven basis points to 282 basis points. Italy’s FTSE MIB Index was little changed despite a global slump in equities. The support for Italian assets came despite the Corriere della Sera newspaper saying that the Finance Minister Giovanni Tria is more tempted to resign his post than previously. Earlier this week, the country’s bonds were boosted by reports that Prime Minister Giuseppe Conte is convincing Deputy Prime Ministers Matteo Salvini and Luigi Di Maio to lower the deficit next year from the 2.4 percent previously outlined.
China Swings Into Action on Trade as ‘Tariff Man’ Trump Ups Pressure
China swung into action to start delivering on the trade commitments that led to its weekend truce with the U.S., even as uncertainty over what was agreed lingers. Beijing will start to quickly implement specific items where there’s consensus with the U.S. and will push forward on trade negotiations within the 90-day “timetable and road map,” the Ministry of Commerce said in a statement on Wednesday morning in China. Hours later, Bloomberg News reported that officials have begun preparing to restart imports of U.S. soybeans and liquefied natural gas — the first sign confirming the claims of President Donald Trump and the White House that China had agreed to start buying some U.S. products “immediately.” In the afternoon, a Ministry of Foreign Affairs spokesman said China hopes to speed up talks and is devoted to finding a solution to settle issues. Global markets cheered the weekend accord on Monday, only to reverse course Tuesday as doubts emerged over exactly what the world’s two largest economies had agreed on. While Asian and European equities dropped Wednesday in the wake of the biggest slide in stocks on Wall Street since the mid-October downdraft, U.S. futures advanced after the statement from China echoed Trump’s optimism over bilateral trade talks. The Ministry of Commerce statement described the meeting with the U.S. as “very successful” and said China is “confident” of implementing the results agreed upon at the talks, but didn’t provide any further details on the outcome. It was the first official confirmation from China that there’s a 90-day window for the talks. China and the U.S. announced a truce in their trade war after the meeting between Trump and Xi Jinping on Saturday, but that quickly descended into confusion, with both sides announcing different statements on what was agreed. There’s also been confusion just on the U.S. side, with the White House, Trump and his advisers making conflicting statements as to the details of a deal.