The week in review
US jobs growth slowed more than expected in December, but the unemployment rate dipped to 4.4%, consistent with a ‘low hire, low fire’ labour market. The jobs report was soft and narrow, with few sectors showing strength. The falling unemployment rate and solid quits rate in the latest Job Openings and Labor Turnover Survey (JOLTS) report make it likely the Federal Reserve will leave interest rates unchanged for now.
In a push to bring down mortgage rates, President Donald Trump announced that government sponsored enterprises Fannie Mae and Freddie Mac will buy an additional USD 200 bn in mortgage bonds. This is effectively quantitative easing by the Treasury and – and as the Fed remits all profits to Treasury – it feeds into the One Big Beautiful Balance Sheet that is ultimately shared by the Fed, Treasury, Fannie and Freddie. Also on Trump’s Make American Affordable Again theme, he called for a 1-year cap on credit card interest rates at 10% starting on 20 January. He did not provide details.
The S&P 5001 rose 1.6% (in USD) last week. This week, Q4 earnings will be key for market direction.
China said its export ban on dual-use items to Japan will only affect military firms, helping calm fears that Beijing might curb rare-earth shipments vital to Japan’s auto industry over Tokyo’s remarks on Taiwan.
Quote of the week
Fed Chair Jay Powell said prosecutors have launched a criminal investigation related to the Fed’s building renovation. Powell said “this unprecedented action should be seen in the broader context of the administration’s threats and ongoing pressure” for lower interest rates. Trump said of the legal action: “I don’t know anything about it, but he’s certainly not very good at the Fed”. The news is negative for the USD and positive for precious metals.
Key data
The ISM services PMI for the US rose for a third consecutive month to 54.4 in December from 52.6 in November, hitting its highest since October 2024. The ISM manufacturing index fell to a 14-month low.
Euro area annual inflation eased to 2.0% in December from 2.1% in November. German factory orders rose strongly. Swiss inflation edged up to 0.1% in December and is expected to rise gradually but remain subdued.
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