Written by Ilaria Massei
A big surprise on Tuesday came from the number of job openings in the U.S. which decreased by 617,000 from the previous month to 8.7 million in October 2023, marking the lowest level since March 2021 and falling below the market consensus of 9.3 million. The data on job openings seemed to drive a continued decrease in long-term interest rates over the week, with the yield on the benchmark 10-year U.S. Treasury note hitting a low of 4.1% on Thursday. However, Yields then rebounded in the wake of the payrolls’ report on Friday, which surprised slightly on the upside with employers adding 199,000 jobs in November versus consensus expectations of around 180,000. The unemployment rate also surprised by falling back to 3.7% from a two-year high of 3.9% in October. As a reminder, this data is important as the Federal Reserve wants to see a weaker US labor market before it will consider cutting interest rates in order to ensure inflation does not re-emerge.
Elsewhere, in Germany, industrial output fell for a fifth consecutive month in October, sliding -0.4%. Factory orders unexpectedly dropped -3.7%. On a separate note, the European Central Bank (ECB) Executive Board member Isabel Schnabel signalled a shift to a dovish stance in an interview with Reuters, saying, “the most recent inflation number has made a further rate increase rather unlikely.” Activity in the UK’s construction sector fell sharply for a third month in a row in November, due to a continued slump in homebuilding, according to a Purchasing Managers’ Index compiled by the S&P Global and the Chartered Institute of Purchasing and Supply.
Statements from The Bank of Japan (BoJ) officials in the week, led some investors to deduce potential preparations for an earlier-than-expected adjustment in the ultra-accommodative monetary policy. This included speculation that the removal of the negative interest rate policy might follow shortly after any potential lifting of the BoJ’s yield curve control policy.
Last Tuesday, Moody’s revised its outlook for China’s government bonds, shifting from “stable” to “negative,” citing concerns about the economic risks posed by heavily indebted local governments and state firms. This downgrade represents the latest challenge for China’s financial markets, already struggling with a prolonged property market downturn and diminishing confidence among consumers and businesses. In response, Beijing has implemented numerous pro-growth measures this year to stimulate demand, yet analysts argue that these efforts have proven inadequate to revive the economy.
This is the last World In A Week for 2023, this communication will resume on Monday, 8th January 2024.
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