Hi fellow Finimizer, here's what you need to know for January 7th in 3:10 minutes.

☕  Finimized over a cold brew at Fach, Bratislava, Slovakia (-1°C/31°F 🌤)

🤓 Keep it brief

  • A significantly better-than-expected December jobs report from the US helped boost markets
  • New Chinese economic data also stoked markets, despite disappointing European figures
Harder, Better, Faster – Stronger?

What’s Going On Here?

Official data released on Friday showed that the US added way more jobs than expected in December – sending investors to work buying up stocks.

What Does This Mean?

The US economy added 312,000 new jobs last month, eclipsing predictions – and the estimated number of jobs added in November was revised higher too. In order to get all these people into work (and convince some to ditch their existing jobs in the process) employers probably offered more generous pay packets – helping boost average US earnings by 3.2% over 2018, also ahead of forecasts. Attractive wages likely caused more people to declare themselves available for work in December; but not all found jobs by Christmas, leading to an increase in the unemployment rate.

Why Should I Care?

For markets: Spotlight on interest rate decisions.
Strong December employment data suggests the US economy is still chugging along. That encouraged investors to look past the slowdown in manufacturing activity and buy up US companies’ stocks in anticipation of strong profits ahead (tweet this). Rising wages typically leads to higher inflation – richer people buy more, pushing the prices of goods and services up – and that could well justify the US Federal Reserve’s planned interest rate rises, which would stop prices increasing too fast. But investors are skeptical: early last week, 90% thought US rates would hold steady or fall this year. In the eurozone, meanwhile, rates still appear set to rise in 2019 – despite prices there rising at an increasingly sluggish rate in December.

The bigger picture: Flexi-time also gave markets a boost.
Also on Friday, the Federal Reserve’s chair said he was more open to slowing down rate hikes or the withdrawal of other market support (a journey Europe’s just begun) than some investors had previously thought. This gave stocks a further boost: a bit more flexibility can’t hurt when US-China trade discussions – and the fortunes of the world economy – are still up in the air.

Ask

Lip Service

What’s Going On Here?

The UK and China both posted fresh data on the level of activity in their economies’ crucial services sectors on Friday. There was sunshine in China – but rain in the UK. Typical...

What Does This Mean?

Activity in China’s services sector – i.e. most jobs that don’t involve “making something” – rose to its highest level in six months in December. That’s good news for a country that’s keen to reduce its reliance on the heavy industry that made it a global powerhouse and instead grow consumer spending as a proportion of its overall economy: it’s currently 40%, compared to the UK’s 80%.

That all-important services sector is barely growing in Britain. A Friday report from the Bank of England also showed that consumers reduced the growth of their borrowing (and, by extension, their spending) to its lowest level since 2015 in November. That’s likely due to higher interest rates making borrowing more expensive, and slowing house price growth making homeowners feel less flush.

Why Should I Care?

The bigger picture: China’s working on it.
On Friday, China’s central bank announced a cut to the percentage of deposits Chinese banks need to keep in reserve – essentially tapping into the country’s piggy bank. The hope is that the newly freed-up cash gets loaned to people and companies, who in turn spend more on products, services – and on investing in future profit growth. Economy-boosting measures were promised by the Chinese government after a spate of dire data late last year and early this rattled investors’ confidence in the health of the country’s economy.

Zooming out: Poor service at Café de Paris.
Yet more data out on Friday showed that growth in the eurozone’s services sector continued its losing streak to reach its lowest level in over four years in December. France was the worst off – its services sector actually shrunk last month, with disruptions caused by the “gilets jaunes” protests largely to blame.

Ask
💬 Quote of the day

"Christmas is over and Business is Business."

- Franklin Pierce Adams (an American columnist and broadcaster)

“What can Apple do to boost its iPhone sales?” - Derek from Massachusetts, USA

“Price cuts are certainly an option that’s front and center – and was highlighted when rumors of stuttering sales first surfaced late last year. Customers have been holding onto their existing iPhones for longer, likely put off by the high price tags on the latest models. Apple also plans to tackle this by making the upgrade process smoother and helping people pay for a new phone over an extended period. Beyond iPhones, the company’s focusing on its digital services segment. Only 25% of people who own Apple gear currently pay for things like Apple Music, and increasing this is one way to grow profits even if more iPeople run Huawei.”

🧐 What We're Reading

We'd love to hear your thoughts. Give feedback

Want to turn off emails? Change settings

Image credits: Vicente Alfonso, Ljupco Smokovski - Shutterstock | Thanakorn.P, THINK A - Shutterstock