After the frisson of investor apprehension last week, volatility over the past couple of days has relapsed towards its lows, with FX, bond and equity markets exhibiting little change. A handful of Asian markets stand out today with 1% gains. The admission of liability on Saturday morning by the Iranians over their involvement in the crash of the Ukrainian airliner did not contribute to any increased market tension.
The release of US monthly payroll data on Friday afternoon revealed new job creation was a little below expectations, with the outcome of 145k,000 being well below the (restated) prior month of 256,000. The cumulative total for new jobs created in the year was 2.1 million. Though the smoothed three-month average remains respectable, and sufficient not to undermine confidence in economic activity (when adjusted for the probable impact of trade friction), the rolling annual earnings growth number of 2.9% created more of a surprise. There had been a rising trend in this annual number during much of the past couple of years, but it peaked last summer and December’s reading is the lowest since July 2018.
This week, investor attention will switch to both the signing of the first phase of the trade agreement between the US and China (due Wednesday) and the start of the US earnings season, traditionally led by the financials. We have JPMorgan, Citibank, Wells Fargo and Goldman Sachs all due to report either tomorrow or on Wednesday.
Closer to home, sterling was a little lower this morning after the Bank of England’s Dr Vlieghe said that he is ready to vote for an interest rate cut at the January meeting if there is no improvement in economic data. The release of the latest monthly GDP data exacerbated this decline, with the UK economy contracting by 0.3% in November. Today was also the deadline for Labour Party leadership candidates, with five candidates securing the minimum twenty-two votes needed to enter the official contest.