Despite a significant number of layoffs in the technology industry and in sectors like finance and housing, the number of Americans filing for new unemployment benefits dropped to a three-month low, indicating a continued tight labour market. This could force the Federal Reserve to continue increasing interest rates in an effort to curb demand and tame inflation. Analysts predict that the terminal interest rate hike will be 5.4%, with a 100 basis point increase this year before the Federal Reserve pumps up inflation by cutting rates aggressively. The market will now turn its attention to the US nonfarm payrolls report for December, which is expected to show an increase of 200,000 jobs.
EQUITY
Wall Street's main indexes suffered steep declines on Thursday, with the Nasdaq Composite leading the charge with a 1.47% drop. The ADP National Employment Report and weekly jobless claims both showed a resilient labour market, leading investors to believe that the central bank will maintain its focus on fighting inflation even as it slows the pace of rate hikes to mitigate economic risks.
GOLD
Gold prices were hovering near seven-month highs, supported by signals from the Federal Reserve that it will raise interest rates at a slower pace in 2023 and fears of a potential recession in the same year. The metal also saw increased demand as a safe haven asset due to the resilience of the U.S. labour market despite headwinds from slowing growth.
OIL
After posting the largest two-day loss in three decades at the start of the year, oil prices rose around 1% on Thursday due to a mixed weekly inventory report and the temporary shutdown of a US fuel pipeline. However, the US Energy Information Administration reported a drawdown in distillate stockpiles, indicating an acceleration in trucking activity, and a rise in exports of US crude.
CURRENCY
The currency market saw mixed movements on Thursday as investors weighed the impact of the Federal Reserve's December meeting and reports that the Bank of Japan (BoJ) may raise its inflation forecasts. The BoJ's anticipation of a potential reversal of its ultra-loose monetary policy later this year contributed to a 0.4% rise in the Japanese yen against the dollar, while the US dollar index rose by 0.85%.
