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LGT Navigator: US labor market report in focus

January 7, 2022

The prospect of faster rising interest rates in the US and a generally more restrictive monetary policy on the part of the major central banks is putting pressure on equity markets. If the official US labor market statistics today show strong employment growth as expected or turn out stronger than anticipated, this is likely to fuel interest rate expectations once again and could put additional pressure on stock markets.

US labor market report in focus

After a solid start to the year, sentiment on the stock exchanges has clouded again noticeably in view of expectations of a more restrictive central bank policy. In New York, the Dow Jones Industrial closed almost half a percent lower on Thursday. The broad S&P 500 and the technology indices on the Nasdaq held up slightly better and went out of trading almost unchanged. However, year-to-date losses on the Nasdaq already add up to about three percent. Earlier, the minutes of the latest interest rate meeting of the Federal Reserve, the FOMC Minutes had spooked concerns about a more aggressive monetary policy stance of the most important central bank. The Fed may see a faster rate hike as warranted given economic and inflation trends.

This afternoon, at 14:30 (CET), the publication of the monthly labor market report from the US is the focus of interest. Analysts expect that 400'000 new jobs were created in the overall economy in December (previous month +210'000) and that the unemployment rate will fall from 4.2% to 4.1%.

Momentum among US service providers weakens

In the US service sector, sentiment cooled from a high level at the end of 2021. This was signaled by the ISM Purchasing Managers Index, which fell more sharply than expected from 69.1 points in November to 62.0 (consensus 66.8).

Producer prices in the eurozone provide further inflationary pressure

In the euro area, the increase at the producer level accelerated even more than expected in November. Year-on-year, producer prices increased by almost +24%, showing the highest rate since the introduction of the euro in 1999. In the corona year 2020, German annual inflation was still only +0.5%. On a monthly basis, prices rose by +1.8% (consensus +1.5%). This was mainly due to the massive increase in energy prices and more expensive intermediate goods because of global supply chain problems. The development of producer prices is likely to be partly visible in consumer prices at a later stage.

Germany's inflation rate reached highest level in almost 30 years in 2021

Driven by energy prices, the inflation rate in Germany rose last year to its highest level since 1993. On average, the cost of living in 2021 increased by +3.1% year-on-year. In December, the year-on-year inflation rate was +5.3%.

Economic Indicators January 7

MEZ Country Indicator Last period
07:45 SZ Unemployment Rate (December) 2.5%
08:00 GE Exports (November, m/m) +4.1%
08:00 GE Imports (November, m/m) +5.0%
08:00 GE Industrial Production (November, m/m) +2.8%
08:45 FR Industrial Production (November, m/m) +0.9%
09:00 AUT Consumer Prices (December, y/y) +4.1%
11:00 EZ Economic Sentiment (December) +117.5
11:00 EZ Consumer Prices (December, y/y) +4.9%
11:00 EZ Core Consumer Prices (December, y/y) +2.6%
11:00 EZ Retail Sales (November, m/m) +0.2%
14:30 US Unemployment Rate (December) 4.2%
14:30 US Non-Farm Payrolls (December) +210'000
14:30 US Average Hourly Eearnings (December, y/y) +4.8%


Earnings Calender January 7

Country Company Period
SZ Swiss National Bank  Year 2021


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