Today’s payroll number was billed as perhaps the most important of 2015, and it has more than lived up to the hype. It exceeded estimates, but not in any ordinary way. Instead of around 185,000 jobs, the US economy created 271,000, the highest number all year. Combined with a good rise in average hourly earnings, and with Janet Yellen’s Wednesday comments about December being very much a ‘live’ month, we have seen expectations of a rate increase rise markedly. It is not a done deal yet, but the stars appear to be aligning to give Janet Yellen her Christmas wish.
Unsurprisingly, the big winner of the day was the US dollar, with the dollar index rising by over 1% after the news; US indices, which enjoyed such a good run in October, continued to shed ground, although the sight of more good news for US workers meant that the losses were relatively contained.
In Europe, the FTSE 100 remained under pressure, while the DAX rallied strongly, mostly thanks to weakness in the euro. Given the rising US dollar and the ECB’s push for more QE, it looks like eurozone stocks may well continue to offer attractions for investors in the final quarter of the year.
Looking ahead into next week, China numbers will take centre-stage, and while the Fed will be pleased about US performance, it would still like to see the figures form this economy improve. Sterling watchers will also have more to deal with, as Mark Carney appears before UK politicians to discuss his latest inflation outlook. He may face some tough questions on his comments earlier in the year about rate increases, which should make for interesting viewing.