Volatile trading week ends with disappointing US payroll numbers – Zurich Weekly Dec 6th 2021

Equity markets endured a volatile week as the Omicron variant dominated
news flow and trading sentiment. Non-farm payrolls grew by 210,000, well
below the 550,000 figure in October and less than half the forecast amount.
However, it is worth noting that the data also showed a decrease in the
unemployment rate to 4.2% whilst the participation rate ticked up to 61.8%.
Such mixed results can be difficult to interpret, but the general consensus is
that the latest reading will do little to alter the Fed’s tapering path.
Fed Chair Jerome Powell testified to Congress on Tuesday, where he
signalled the possible acceleration of the tapering of the bond purchase
programme, with further information to be revealed at the Fed meeting on
15th December. Developments regarding the Omicron variant over the
coming week are also liable to feed into the Fed’s thinking. Whilst there has
been a degree of market ‘noise’ in respect to the variant, it is still liable to be
a number of weeks before the full impact can be determined.
Other US economic releases were positive last week, with manufacturing
and services PMIs both staying well in expansion territory. The ISM
Manufacturing index climbed to 61.1, with Services coming in at 69.1, another
all-time high reading. Commercial construction spending also rose as the
Residential sector continues to moderate as supply chain blockages persist.
In the Eurozone, November inflation came in above expectations with a
positive reading of 4.9% (YoY), with energy costs being the main driver.
Eurozone Retail Sales also rose 0.2% over the course of the last monthly
reading, which was slightly lower than the consensus forecast of 0.3%.
Finally, in China, manufacturing activity unexpectantly rose and moved back
into expansion territory with a reading of 50.1.