Market hopes for relief from monetary policy took another knock yesterday.
In the US, the economy showed fresh signs of resilience. From Reuters:
The U.S. unemployment rate fell to a 5-1/2 year low in October as 92,000 jobs were added and hiring in the two prior months was revised up, the government said on Friday, leading financial markets to slash bets on interest-rate cuts...
[The Labor Department] revised up September's job-creation total to 148,000, or nearly three times the 51,000 it reported a month ago, and said there were 230,000 new jobs in August instead of 188,000.
The unemployment rate fell in October to 4.4 percent from 4.6 percent in September. It was the lowest jobless rate since 4.3 percent in May 2001...
At mid-morning, the Institute for Supply Management...said its monthly services index climbed to 57.1 last month from 52.9 in September..
Notwithstanding softer overall growth, the Labor Department said average hourly earnings in October rose 0.4 percent to $16.91 -- higher than the 0.3 percent that analysts had anticipated -- while the average work week edged up to 33.9 hours from 33.8. Over the year, average hourly earnings have risen by 3.9 percent, the department said.
The story is similar in the UK. Reuters reports that pay rises next year will be more generous than in 2006. It also reports that the service sector grew faster than expected in October.
The Chartered Institute of Purchasing and Supply/Royal Bank of Scotland's services business index jumped to 59.3 last month, one of the highest readings in the survey's 10-year history.
That was up from 57.0 in September and well above analysts' forecasts of 56.7. Any reading above 50 indicates expansion and the service sector -- which accounts for about 75 percent of the economy -- has been growing for 43 straight months...
However, input prices rose at their slowest pace since July 2005 and the average prices charged index registered its lowest level of growth since February, indicating that inflationary pressures may be cooling slightly.
In China, the central bank has seen enough. From Xinhua Online:
The People's Bank of China, or the central bank, announced on Friday that it is to raise the deposit reserve ratio of banks, excluding rural cooperative banks and credit cooperatives, by 0.5 percentage points from Nov. 15...
The hike will bring the reserves that most banks are required to deposit with the central bank to nine percent.