ADP and JOLTS job openings data in focus

A mixed start in Europe as markets continue to trade in an anticipation of tomorrow’s expected rate cut from the Federal Reserve. Concerns around the incessant rise in borrowing costs does create a worrying backdrop to the likely 25-basis point cut tomorrow, highlighting fears around the potential implications for global debt levels as the growing reliance on short-term debt means any rise in yields puts additional stress on the system. Notably, the main mover in the bond market today has been the Australian treasuries, coming off the back of an RBA pause which came alongside a warning that price pressures were building as demand runs stronger. Somewhat ominously, the US experience of higher inflation and a weaker jobs market appear to be emerging in Australia, highlighting the fear that stagnation becomes more prominent across the globe.

US tech stocks will be in the limelight today, following Trumps agreement to allow the export of advanced chips such as Nvidia’s H200 to China. Understandably this is a win for the likes of Nvidia, AMD and Intel, with China representing far more than simply one more market to expand into. The debate over who leads in the AI war highlights the fact that China will arguably provide a market as big as the US should these companies manage to become embedded into the fabric of their build-out. However, the fear is that the export of these key products will simply speed up the development of Chinese products and services that ultimately undercut US firms much like we have seen for the EV market.

Looking ahead, today brings a welcome batch of employment figures, with the delayed official jobs report meaning that the JOLTS job openings and weekly ADP payrolls data provide two rare key data points for the Fed to mull over. Market pricing for a December rate cut now lies at a convincing 89% according to the CME, thus putting additional interest on the pace of easing next year. With Job openings expected to fall further , additional weakness could put more pressure of the Fed to ease in Q1. However, while the S&P 500 managed to close within 1% of record highs yesterday, JP Morgan have warned that they see tomorrow's rate cut as a potential ‘buy the rumour, sell the fact’ situation.