Last week’s surprisingly strong gain in November payrolls may be a sign that the US economy is improving, but you wouldn’t know it by looking at the Treasury market. Or would you? Actually, much depends on which portion of the yield curve you’re gazing at. The 2-year yield has popped higher since Friday’s bullish payrolls data, which is what you’d expect for this maturity — typically the most sensitive slice of the curve when it comes to rate expectations. But the analysis is complicated by tumbling inflation expectations.
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● Congress races to reach spending deal before shutdown deadline | MSNBC
● UK industrial production unexpectedly slips in October | MarketWatch
● German Exports Drop Modestly; Imports Fall Most Since 2012 | RTT
● Brent crude oil hits five-year low below $66 on oversupply | Reuters
● Cheap Oil Also Means Cheaper Commodities Amid Surpluses | Bloomberg
● China’s stock mania decouples from economic reality | Telegraph

The great divide between health care and energy in US equities rolls on. Health care shares continue to dominate the recent rally in the US stock market while energy firms remain conspicuous laggards, based on one-year returns. In fact, energy is the only sector currently posting a loss for the trailing 252-trading-day period, according to a representative set of ETFs through Friday (Dec. 5). Positive momentum certainly favors the health sector lately, and it wouldn’t be surprising to see it persist in the near term. But it’s also reasonable to wonder if recent events are laying the foundation for a profitable reversion-to-the-mean trade in the energy patch at some point.
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The US economic trend remains positive and stable after recovering from October’s sharp but brief stumble, according to a markets-based estimate of macro conditions. The Macro-Markets Risk Index (MMRI) closed at +8.5% on Friday (Dec. 5). The index is near the level that prevailed just ahead of its mid-October tumble. The benchmark’s persistence above zero lately suggests that business cycle risk remains low. A decline below 0% in MMRI would indicate that recession risk is elevated; readings above 0% imply that the economy will expand in the near-term future.
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● German Industrial Output Rises In Oct as Economy Recovers | Bloomberg
● Eurozone Sentix Investor Confidence Improves In December | RTT
● Japan’s Q3 GDP shrinks more than initially reported | MarketWatch
● US Gasoline Prices Have Hit a 4-Year Low | Time
● Emerging Currencies Decline to Decade-Low as China Shares Rally | BusinessWeek
● China’s November imports fall unexpectedly, export growth eases | Reuters
● Bank of France Keeps Q4 French GDP Growth Forecast at 0.1% | MNI

● Basic Economics (5th ed.)
By Thomas Sowell
Summary via publisher (Basic Books)
In this fifth edition of Basic Economics, Thomas Sowell revises and updates his popular book on common sense economics, bringing the world into clearer focus through a basic understanding of the fundamental economic principles and how they explain our lives. Drawing on lively examples from around the world and from centuries of history, Sowell explains basic economic principles for the general public in plain English. Basic Economics, which has now been translated into six languages and has additional material online, remains true to its core principle: that the fundamental facts and principles of economics do not require jargon, graphs, or equations, and can be learned in a relaxed and even enjoyable way.
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As good news for the labor market goes these days, today’s numbers from Washington for November payrolls rank as one of the better reports in recent memory. Private-sector employment increased by a strong 314,000 last month, way above the +225,000 consensus forecast. “Job gains were widespread, led by growth in professional and business services, retail trade, health care, and manufacturing,” the Labor Department said in today’s release.
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The growth in US retail spending has eased lately, with the year-over-year pace dipping to 4.1% through October — the slowest rise since July. Is that a sign that consumption on Main Street will end the year on a disappointing note? Not necessarily, according to the latest run of reports from the front lines of the retail sector. The government’s November national profile of retail sales doesn’t arrive until Dec. 11, but the preliminary outlook looks mildly encouraging, based on recent figures from private sources. Here’s a summary of what the numbers are telling us at the moment for anticipating next week’s November update on retail sales from the US Census Bureau:
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● German industry orders surge by 2.5 pct in Oct | Reuters
● Bundesbank Cuts Outlook Even as Factory Orders Jump | Bloomberg
● US jobless claims fall back below 300,000 | MarketWatch
● ECB’s Draghi Opens Door to New Stimulus, But Not Yet | WSJ
● Spain’s Industrial Output Growth Rises In October | RTT
● Japan Leading Index Falls To 22-Month Low | RTT
● China Nov data to show economy still cooling | Reuters

Private nonfarm payrolls in the US are projected to increase 206,000 (seasonally adjusted) in tomorrow’s November update from the Labor Department, based on The Capital Spectator’s median point forecast for several econometric estimates. The monthly prediction reflects a slight deceleration in growth vs. October’s 209,000 gain.
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