US equity index futures are little changed

Market movers today

  • It is time for US payrolls, where we look for a solid report (see US Labour Market Monitor – Expect strong November report, 5 December). We look for a rise in employment of 195,000 in line with consensus. In our view, hourly earnings will be equally important for markets. We look for a lift to 2.6% y/y in November, from 2.4% y/y. It is still quite moderate wage growth, though, which should keep the Fed on track for a very gradual hiking pace (we expect two hikes in 2018).

  • This morning Germany releases labour costs for Q3. As Germany has the tightest labour market in the euro area, with the lowest level of unemployment in decades, this is likely to be where we should look for the first signs of wage pressure. However, so far, wage growth has been muted. It was 2.3% y/y in Q2. Despite a tight labour market , we believe wage increases will continue to be quite moderate keeping a benign outlook for inflation.

  • The UK is due to release manufacturing production and the NIESR GDP estimate for November.


Selected market news

Asian stock markets rallied this morning after the value of a Bitcoin broke above USD16,600, intensifying the debate whether it is a bubble about to burst . US equity index futures are little changed, while the GBP rallied overnight on rising expectations that a deal between the UK and EU might be reached today.

In the US, Congress has averted a government shutdown on Saturday, by passing legislat ion that will maintain funding for two weeks, deferring decisions on spending for defence and domestic programmes. Lawmakers now have unt il 22 December to overcome lingering differences, while Republicans still hope to finish tax legislation before year-end.

China's November trade figures released overnight surprised on the upside, as exports and import s grew by 12.3% y/y and 17.7% y/y, respect ively. Chinas' t rade performance has rebounded this year thanks to st rong domest ic and external demand but we st ill expect the export engine to slow somewhat . Meanwhile, revised GDP figures showed that Japan's economy grew twice as quickly as originally estimated in Q3 (2.5% annualised) due to big gains in capital expenditure.

Germany's SPD party has decided t o hold talks wit h Angela Merkel's CDU party but wit hout committing to a specific outcome. This opens the door to Germany's third grand coalition in 12 years but, in our view, talks are likely to drag on well into 2018. Martin Schulz was also re-elected as SPD party leader but the party dismissed his proposal for a United States of Europe by 2025.

Time is running out for PM Theresa May to find a solution for the Irish border issue to be cleared ahead of the EU summit next week, as EU chief negotiator Michel Barnier stressed that the UK/EU have only 48 hours left to reach an agreement. If no deal is reached, the next EU summit is in March. May is set to meet EC president Jean-Claude Juncker and European Council President Donald Tusk today in Brussels in the hope of finalising an agreement on phase 1 of Brexit negotiations.

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