After climbing to a record high, Sensex is trading lower today

Labour market in the US is continuing to show signs of loosening, as ADP data shows that private payrolls were up by only 103k in Nov'23

Sonal Badhan,

Economist,

Bank of Baroda

Mumbai, December 7, 2023: Labour market in the US is continuing to show signs of loosening, as ADP data shows that private payrolls were up by only 103k (est.: 120k) in Nov’23, easing from downwardly revised 106k in Oct’23. Conditions in Germany also remain under pressure with factory orders (MoM) in Oct’23 declining by (-) 3.7% versus est.: +0.2% and 0.2% increase in Sep’23. With weakening economic conditions, analysts are pricing in higher probability of rate cuts next year. ECB is expected to begin lowering rates from Mar’24 and cumulatively by 150bps. CME’s Fed watch tool also suggests 60% chance of Fed cutting rates from Mar’24 (cumulatively by 125bps). Muted improvement in China’s export growth in Nov’23 (0.5% versus est.: -1.5% and -6.4% in Oct’23) is unlikely to change the course of global growth slowdown.

• Barring US indices and Shanghai Comp, other global indices ended higher. Investors monitored renewed bets of Fed beginning with rate cuts soon, amidst signs of labour market cooling off. On the other hand, Sensex climbed to a record high supported by strong gains in power and oil & gas stocks. However, it is trading lower today in line with other Asian stocks.
• Except INR, other global currencies ended lower against the dollar. DXY inched up by 0.1% ahead of the crucial non-farm payrolls report. EUR was lower amidst growing optimism that ECB will start with rate cut as early as Mar’24. INR strengthened by 0.1% supported by falling crude prices. It is trading weaker today, in line with other Asian currencies. 
• Barring India (flat) and China (higher), other global yields closed further lower. 10Y yields of UK, US and Germany fell the most. With economic activity slowing, investors are pricing in increased probabilities of rate cuts next year (-125bps by Fed and -150bps by ECB). India’s 10Y yield closed flat, ahead of RBI’s monetary policy decision. It is trading a tad lower at 7.24%.

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