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Expectations of Rate Cuts Boosted by Fall in US Job Openings

Miguel A. Rodriguez
Miguel A. Rodriguez
06 December 2023

Fall in US job openings in October gave markets a clear sign that the job market is cooling. On the back of this news stocks gained and treasuries resumed their rally. Read on to see how else markets have been moving. 

Investors Wait for the US Monthly Employment Report  

Investors started the week and the month off without showing a clear direction. This is because they are waiting for the publication of the US monthly employment report at the end of the week. The important report could set the course for markets and reassess expectations of a reduction of the Federal Reserve's (Fed) interest rates for Q2 2024. Federal funds futures currently reflect his scenario.

US Job Openings Fell to 8.7 Million in October

Yesterday the Job Openings and Labour Turnover Survey (JOLTS) was published. The survey is an indicator of labour demand and is closely followed by investors.

The JOLTS report showed that job openings in the world's largest economy fell to 8.7 million on the last day of October. The number shows a drop from 9.553 million on the last day of the previous month, indicating a cooling of the labour market. The news was well received in the market.

Treasuries Resumed Rally as Expectations of Rate Cuts Mount

After the release, Treasuries resumed their rally as a slowdown of the labour market reinforced speculations of rate cuts by the Fed to avoid a recession.

Yields fell across the US curve to the lowest level since last summer.

US ISM Non-Manufacturing PMI Rose to 52.7 in November

Another piece of data released yesterday was US service sector activity, which offered optimistic news. The ISM non-manufacturing PMI rose to 52.7 in November, an improvement from the previous month's 51.8 and is a sign that expansion could be in the cards.

Economic Data Helped the Stock Market Gain

Considering potential interest rate cuts and as the US economy has not shown signs of a recession, the stock market reversed its initial movement yesterday. The session had started with losses but then the North American indices moved into positive territory, although without much momentum.

Today the ADP private employment data will be released. This data will also be followed closely by investors, awaiting the most important non-farm payrolls data.

Gold Rallied at the Start of the Week

The performance of gold has been the highlight of the first two days of this trading week.

After an impressive bullish rally early Monday morning, gold turned around and lost more than $130 from its highs.

There is talk in the market of purchases by central banks due to geopolitical tension. This notion was reinforced after Monday’s spectacular rise. Also, expectations of a lower US Dollar, with which gold has an inverse correlation, have provided support for the yellow metal lately.

But technically, after these rapid up and down movements, the price of gold has formed a bearish candlestick pattern. It has also shown divergences in the daily RSI with support in the $2000 area, below this reference the losses could increase.

gold chart 6 dec 2023.png

Gold daily chart, December 6, 2023. Source: CAPEX.com WebTrader.

Key Takeaways

  • The US JOLTS report showed job openings fell to 8.7 million in October.
  • Treasuries resumed their rally after the news of a cooling US labour market.
  • Markets’ expectations that the Fed may cut rates to avoid a recession were boosted.
  • US ISM non-manufacturing PMI rose to 52.7 in November.
  • Optimistic news about potential rate cuts brought stocks up.
  • Investors wait for the release of the ADP private employment data today.
  • Gold started the week off with great gains but felt a fall yesterday.

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Sources: Bloomberg, Reuters 

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Miguel A. Rodriguez
Miguel A. Rodriguez
financial_writer

Miguel worked for major financial institutions such as Banco Santander, and Banco Central-Hispano. He is a published author of currency trading books.