US data backlog meets Fed rate expectations

​​​US data deluge finally arrives

​The prolonged US government shutdown created an unusual backlog of economic releases, and this week traders finally get the clarity they've been waiting for. November payrolls data arrives on Tuesday, followed by consumer price inflation figures on Thursday. Both releases carry extra weight given the extended delay.

​Markets have been flying somewhat blind without this data, relying instead on sentiment and momentum. That changes now. The November employment report will reveal whether the labour market maintained its resilience through the final months of 2024, or if cracks are appearing.

​Consumer spending data will also emerge from the backlog, offering insight into the health of the US consumer heading into the new year. With household finances under pressure from higher borrowing costs, any signs of weakness could shift market expectations quickly.

​Fed rate path hangs on inflation print

​Last week's Federal Reserve (Fed) rate cut was broadly anticipated, but the path ahead remains uncertain. Markets are pricing in further easing, yet that assumption rests on inflation continuing to moderate. Thursday's consumer price index (CPI) release will either validate or challenge that view.

​Sticky inflation would complicate the Fed's plans considerably. Core CPI has proven stubborn in recent months, and any upside surprise could force a rethink on the pace of cuts. Markets have grown comfortable with the idea of continued easing through 2025.

​November payrolls on Tuesday provide the first test. Strong job creation coupled with wage growth would suggest the economy retains more heat than the Fed might like. That could support the argument for a more cautious approach to further rate reductions.

​The Fed faces a delicate balancing act. Cut too quickly and inflation could reignite. Move too slowly and unemployment may rise faster than desired. This week's data will help determine which risk looks more pressing.

​Wall Street retreats from record highs

​US equities ended the week on a softer note despite the S&P 500 hitting fresh all-time highs earlier in the session. Technology and AI-linked stocks bore the brunt of selling, with investors taking profits after an extended rally in these names.

​The pullback in mega-cap tech stocks dragged on broader indices. These companies have driven much of the market's gains over the past year, and when they stumble the impact reverberates across portfolios. Still, the dip hardly qualifies as dramatic given how far prices have run.

​Some profit-taking was inevitable after such a strong performance. The S&P 500 has climbed steadily since late October, and traders are naturally becoming more selective. The question is whether this represents a brief pause or the start of a deeper correction.

​FTSE 100 rebounds alongside Europe

​UK shares recovered after two consecutive weekly declines, with the FTSE 100 rising in tandem with European markets. Banks and miners provided the bulk of support as bond yields eased slightly and commodity prices found their footing.

​The rebound came as something of a relief after recent weakness. UK equities have lagged their US counterparts for much of the past year, and any sign of relative strength tends to be welcomed. That said, the rally lacked real conviction.

​European markets also found buyers as the week progressed. Better sentiment around China helped support luxury goods and auto stocks, while falling bond yields removed some pressure from rate-sensitive sectors. The overall picture remains mixed though.

​The FTSE 100's heavy weighting towards energy and materials stocks makes it particularly sensitive to commodity price moves. This week copper rallied and precious metals held firm, providing tailwinds for the miners. Whether this persists depends largely on Chinese demand signals.

​Sector rotation: miners shine, energy fades

​Mining stocks delivered some of the week's strongest gains as copper prices recovered from recent lows. Rio Tinto, Glencore and Antofagasta all advanced, lifted by firmer metal prices and signs of improving Chinese industrial activity. These heavyweight stocks provided crucial support for the broader index.

​The copper rebound suggests traders are becoming more optimistic about demand prospects. Chinese stimulus measures and US infrastructure spending plans both offer potential support for industrial metals. Gold also held near recent highs as investors maintained safe-haven positions.

​Energy stocks moved in the opposite direction, weighed down by broker downgrades and concerns about demand. Oil prices have struggled to find direction amid conflicting signals about the global economic outlook. That uncertainty is reflected in share price performance across the sector.

​UK corporate movers in the spotlight

Ocado shares jumped sharply after announcing a one-off $350m payment from US partner Kroger. The payment resolves a long-running dispute and provides a welcome cash injection for the online grocer. Investors had grown increasingly concerned about Ocado's cash position.

Frasers Group rallied on news of a fresh share buyback programme. The sports retail giant continues to generate strong cash flows despite challenging trading conditions on the high street. Mike Ashley's group has proven adept at navigating the shift to online shopping.

​TT Electronics suffered a sharp decline after DBAY abandoned its takeover interest. The electronic components manufacturer had attracted attention as a potential M&A target, but that speculation now appears premature. The shares gave back gains accumulated on takeover hopes.

​What to watch this week

​Tuesday's payrolls report kicks off the data deluge. Traders will scrutinize the headline jobs number, but wage growth figures may prove more important for Fed expectations. Any acceleration in earnings could unsettle bond markets and cap equity gains.

​Thursday's CPI print represents the week's main event. Markets have largely priced in further Fed easing, and that assumption rests on inflation continuing to cool. An upside surprise would force a rapid reassessment of rate expectations.

​Beyond the data, earnings results begin to trickle in from major banks and retailers. These reports will offer insight into consumer resilience and credit quality. Any warnings about economic conditions could shift sentiment quickly.