Employment makes strongest monthly gain in a year

Australia: 

Employment rebounded 39.1k in November, the strongest monthly gain in a year. 

The stronger-than-expected increase in November however, followed a string of relatively weak outcomes in previous months. 

When assessing the broader trend, employment growth remains quite weak.

Employment grew 0.7% in the year to November, the weakest annual pace in over two years. 

The unemployment rate edged higher from 5.6% in October to 5.7% in November, which was largely reflective of more people looking for work. 

The participation rate edged back up from 64.4% in October to 64.6% November. 

Consumer inflation expectations according to the Melbourne Institute edged slightly higher in December to an annual rate of 3.4% from 3.2% previously. Expectations remain well contained.

Share Markets:

Share markets rebounded, following an initial selloff after the Federal Reserve decision on Wednesday.

The prospect of Trump's policies of deregulation in the financial sector and fiscal stimulus were also likely factors in driving the rally. The Dow rose 0.3%, while the S&P500 lifted 0.4% overnight.

Interest Rates: 

US 10-year treasury yields initially extended yesterday's post-FOMC rate rise by another 7bp to 2.64% - a two-year high - before steadying around 2.50%.

The 2-year bond yield similarly pushed higher to 1.30% before consolidating.  Federal funds futures are now pricing a 100% chance of another hike by June 2017.

Foreign Exchange:

The US dollar index was stronger overnight, outperforming all major currencies. 

EUR/USD extended its FOMC fall from 1.0500 to 1.0367 - a 14-year low.  USD/JPY extended its rise to 118.66 - a 10-month high. 

AUD/USD fell further, from 0.7425 to 0.7338.  NZD/USD fell from 0.7100 to 0.7011.  AUD/NZD rose from 1.0450 to 1.0473.

Commodities:

Commodity prices mostly weakened on the back of US dollar strength, with the broad CRB index down.

Losses were capped for oil prices given OPEC's commitment to cut production. Gold prices fell to its lowest in 10½ months.

Europe: 

Eurozone composite PMI numbers were in line with expectations in December, according to the latest release from HIS Markit. 

The flash composite reading was 53.9, matching November's reading, which was the highest reading this year and comfortably above 50.0 that indicates growth. 

Markit said the PMI pointed to the bloc's economy growing around 0.4% this quarter.

New Zealand:

The performance of manufacturing index indicated a 0.7 point fall for November to 54.4. Despite this decline to a 13-month low, the PMI remains above its long-term average of 53.2, and remains above 50 indicating an expansionary result.

Residential construction continues to underpin economic activity. The volume of residential building work rose 2.4% in the September quarter.

United Kingdom:

The Bank of England (BoE) kept its main interest rate at a record low of 0.25%. 

The BoE also unanimously voted to keep its two asset-purchase programs running as planned. 

After cutting the key rate in August after the Brexit vote, the BoE said policy can now respond "in either direction" to the changes in the outlook. 

The BoE said overnight that sterling's strong performance over the past month could soften an expected surge in British inflation next year. 

British inflation hit its highest rate in more than two years last month, though at 1.2% it still remains below BoE's 2% target. 

Officials saw a stronger global economy - and the chance of a further boost from the spending plans of US President-elect Donald Trump - but also warned of greater risks from Europe, China and other emerging markets.

In terms of data, retail sales volumes, including fuel, were 5.9% higher than a year earlier in November, down from October's 7.2% rate, which was the strongest since 2002. This decline was in line with consensus forecasts.

United States: 

The Philadelphia Fed index jumped from 7.6 in November to 21.5 in December, the highest in over two years.

Another regional survey, the New York Empire manufacturing index also rose, lifting to its highest in eight months to a reading of 9.0 up from 1.5 in December.

Finally, the Markit manufacturing PMI index edged slightly higher from 54.1 in November to 54.2 in December,
Housing data was also more upbeat.

The NAHB housing market index jumped from 63 to 70 in December, the highest in 11 years, pointing to a jump in confidence among home builders.

Consumer prices rose by 0.2% in August, after a flat outcome in July.  In the year to August, the CPI increased by 1.1% after advancing 0.8% in July. 

Rising rents and healthcare costs offset a drop in gasoline prices. 

The core CPI, which strips out food and energy costs, rose 0.3% in the month, the biggest increase since February. 

The steady build-up of inflation should allow the Federal Reserve to raise rates further next year.



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