Watch out for the US job report

European equity markets fell yesterday after the shock of the Fed minutes, but they have almost stabilised in the US and the trend has reversed in Asia before the publication of the US job report today. Status quo on rates (US 10yr at 1.72%) and currencies (EUR/USD at 1.13).

Can this report re-launch the correction by highlighting the urgency for the Fed to adjust its policy as soon as possible? As for job creation, the answer is an unambiguous “yes”: the consensus forecast is 450k, while the ADP private employment report showed over 800k and the official figures were already well below that in November. The two series always end up converging.

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As far as wages are concerned, they were boosted in December 2020 by a pandemic effect (new containment and therefore a plunge in low-paid jobs in the hotel industry in particular). But the consensus already incorporates this negative base effect and expects a slowdown from +4.8% to +4.2% yoy. On the trend of the last few months, we can think that the risk is slightly higher than the consensus too, but there will still be a slowdown, which will complicate the analysis.

Another figure to watch today is inflation in the euro area Again, the national data suggest that the expected slight decline (from 4.9% to 4.8% yoy) may not happen. Finally, the figures published this morning show a decline in industrial activity in Germany and France in November, which points to supply difficulties and therefore to inflationary pressures. As for the effects of the pandemic on activity, the European Commission’s December survey should provide some interesting information, perhaps different from the PMIs which have remained very high overall.

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