Strong US data fuels Fed hawks before critical jobs report [Video]

Good news was bad news yesterday and they even wiped out the optimism that Nvidia initially created around AI with the announcement of new products.

The US released a set of higher-than-expected ISM data, suggesting that non-manufacturing activity was better than expected in December – in contradiction to the S&P’s PMI data released a day before. But what really dampened the market mood was that prices paid by companies unexpectedly - and meaningfully - jumped to the highest levels since 2023. Separately, JOLTS data hinted at an unexpected jump in job openings in November to above 8 mio jobs openings. The better-than-expected US data fuelled the hawkish Federal Reserve (Fed) expectations, pushed the US yields higher and kicked the expectation of the next Fed cut further down the road.

The US dollar rebounded against most majors as the latest US data fuelled the Fed hawks. Due today, the ADP report is expected to print a relatively soft number of new private job additions last month.

In Europe, the CPI reading came in line with expectations, fuelled the European Central Bank (ECB) doves, pulled the euro lower and pushed stocks higher. Across the Channel, the UK’s 30-year gilt yield advanced to the highest level since 1998.