Nonfarm Payrolls Less Than Expected

STOCK INDEX FUTURES

Nonfarm payrolls in December increased 199,000 when a gain of 400,000 was expected. Private payrolls increased 211,000 when up 363,000 was anticipated and manufacturing payrolls advanced 26,000 when a gain of 35,000 was estimated. The average workweek was 34.7 hours when 34.8 hours was predicted.

The labor participation rate was as expected at 61.9%.

The unemployment rate was 3.9% when 4.1% was anticipated.

Average hourly earnings increased 0.6% when a gain of 0.4% was predicted.

The 2:00 central time November consumer credit report is expected to show an $18.8 billion increase.

The longer-term fundamentals remain supportive despite the more hawkish Federal Reserve.

CURRENCY FUTURES

The U.S. dollar index and the euro currency remain in broad sideways patterns, and with interest rate differential expectations offering no clear advantage to either currency, the sideways trade will likely continue for the U.S. dollar and the euro currency over the near term.

Industrial production in Germany unexpectedly edged down 0.2% month-to-month in November of 2021, following a downwardly revised 2.4% increase in October and compared to market forecasts of a 1.0% jump.

A hawkish Bank of England will likely continue to support the British pound. The Bank of England surprised traders in December by hiking interest rates from record low levels. In addition, markets have priced in up to four Bank of England interest rate hikes in 2022.

The Japanese yen steadied, as Japan’s finance minister stressed the need for currency stability and said he was watching market moves and their impact on the economy. The yen dropped to 5-year lows earlier this week due to diverging monetary policies. The Bank of Japan is widely expected to maintain its ultra-loose policy as Japanese inflation remained well under the 2.0% central bank target.

An accommodative Bank of Japan will likely result in pressure on the yen.

INTEREST RATE MARKET FUTURES   

Federal Reserve speakers today are Mary Daly at 9:00, Raphael Bostic at 11:15 and Thomas Barkin at 11:30.

Some analysts are pointing out that the FOMC is tightening credit conditions at a time when the rate of growth in the economy may be slowing, citing the flattening yield curve since March 2021.

Also, several large investment banks have reduced their estimates of GDP growth.

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