A powerful stock rally following the release of the strongest payroll number in 14 months reversed this morning after investor enthusiasm was quelled by suppressed rate cut hopes. Indeed, the chance of 75 basis points of reductions this year was pared back subsequent to the 130k blockbuster figure, which was accompanied by lower-than-expected unemployment and an upside beat on wages. Yields jumped as the print hit the wire, with the curve climbing in bear-flattening fashion led by the monetary policy sensitive shorter-tenors, reflecting fading optimism regarding imminent central bank accommodation. Precisely the cyclical areas in equities that are poised to benefit from a reacceleration in growth amidst looser financial conditions sparked the U-turn, as the argument that the Fed needs to respond to slowing labor demand weakens substantially, even as this morning’s annual revision took away a substantial amount of past job gains. Commodities are advancing across the board in light of a brighter outlook for hiring and economic activity, but the greenback is weakening despite slipping Treasuries, as currency watchers consider that President Trump is likely to push for cheaper borrowing costs irrespective of the increasingly robust employment picture. Elsewhere, a lack of speculative fervor is weighing on cryptocurrencies, volatility protection instruments are flat in light of a turbulent backdrop and forecast contracts are catching bids.
International Roundup
Chinese Wholesale Prices Continue Multiyear Decline
China’s stubborn factory gate-price deflation continued last month while retail stickers continued to rise at a slower than expected pace. The Producer Price Index, which has fallen every month since October 2022, sank 1.4% year over year (y/y) in January, a marginally smaller drop than the economist consensus expectation for a 1.5% decline. The gauge was down 1.9% y/y last month. Consumers, however, dished out 0.2% more on month a month-over-month (m/m) and y/y basis last month, according to the Consumer Price Index. Economists anticipated that retailers would fetch 0.3% and 0.4% more m/m and y/y. In December, the metric depicted shoppers paying 0.2% and 0.8% more m/m and y/y. When stripping out volatile food and energy prices, the Core CPI was up 0.8% y/y, a deceleration from December’s 1.2% jump.
January’s Producer Price Index points to the challenge that Chinese officials have with fighting deflation. With excess manufacturing capacity, weak domestic consumption and a glut of dwellings, government officials have sought to prevent price wars and last Tuesday emphasized their commitment of initiating loose monetary policies.
South Korea Payroll Growth Slows, Unemployment Rate Dips
South Korean employers added 108,000 individuals to payrolls last month, a 0.4% y/y increase but the slowest expansion in 13 months, according to the country’s Ministry of Data and Statistics. Nevertheless, it was the 12th consecutive month of expanding payrolls. Job creation was led by health and social welfare services, which added 185,000 employees. The transportation and warehousing category and the arts, sports and leisure service industry followed with 71,000 and 45,000 additional individuals punching time clocks.
Yet manufacturing shed 23,000 jobs y/y, marking 19 consecutive months of softening employment while construction shed 23,000 positions, extending its payroll decline to 21 consecutive months.
At the same time, the unemployment rate moved from 3.3% in December to 3%.
Australia Home Loan Growth Continues
The number of mortgage loan commitments for new owners who occupy their homes in Australia climbed 4.8% quarter over quarter during the final three months of last year and the value of the financing climbed 10.6% following the subsequent period’s 6.4% ascent, according to the Australian Bureau of Statistics. On a broader basis, the total number of new residential loan agreements climbed 5.1% and the value was up 9.5%.
Canada Construction Plans Exceed Expectations
The total value of proposed construction projects approved by Canada in December was up 6.8% m/m, a reversal from the preceding month’s 13.2% drop and exceeding the consensus expectation for a 4.9% gain. The value of December approvals, however, was still down 3.6% relative to the year ago period. Among residential projects, the value of single-family approvals fell 4.6% m/m and 14.7% y/y.