CNBC Daily Open: Readying for a soft landing?

This report is from today’s CNBC Daily Open, our new, international markets newsletter. CNBC Daily Open brings investors up to speed on everything they need to know, no matter where they are. Like what you see? You can subscribe here.

Better-than-expected jobs market
U.S. nonfarm payrolls rose by 199,000 in November, more than the Dow Jones estimate of 190,000 and October’s increase of 150,000. The unemployment rate dipped to 3.7% compared with economists’ expectations as well as October’s reading of 3.9%. Average hourly earnings increased by 0.4% for the month, better than estimates of 0.3% growth.

Inflation expectations plunge
Consumers think U.S. inflation will drop to 3.1% in a year, according to December’s University of Michigan consumer sentiment survey. That’s markedly lower than the 4.5% one-year inflation rate consumers expected in the November survey, and is the lowest level since March 2021. Consumer optimism is also at its highest since July.

Mixed markets
U.S. markets finished the week higher, boosted by a strong jobs report alongside news of moderating inflation expectations. Asia-Pacific markets traded mixed Monday. Hong Kong’s Hang Seng Index sank more than 2% on news that China’s consumer prices in November slid the most in three years. Meanwhile, Japan’s Nikkei 225 jumped around 1.4% on hopes the Bank of Japan might not tighten rates at its next meeting.

Livestream shopping goes virtual
Traditional e-commerce sales in China fell by 1% — but livestreaming ones surged by 19% during the latest Singles Day shopping festival in November, according to a McKinsey analysis. Livestream shopping’s now moving away from using real-life hosts to virtual avatars. This, in turn, is fueling a boom in new technologies as companies try to cash in on the trend while cutting costs.

[PRO] JPMorgan picks Chinese stocks
China’s economy has proven disappointing for a few quarters — but some of the country’s businesses are pulling ahead and posting encouraging earnings results. JPMorgan Chase analysts pick Chinese stocks that are leading their industries. A surprise: Alibaba’s not on the list.

U.S. jobs growth accelerated again in November, after falling month-over-month in October, while hourly wages rose more than expected. Both figures initially fanned inflation fears. But investors realize the resilient jobs market and buoyant consumer sentiment are preparing the path for a soft economic landing.

The increase in jobs additions has to be understood in context. Despite the U.S. economy expanding at a blisteringly fast 5.2% rate in the third quarter, the mood has been downcast of late with murmurs of “recession” growing louder.

But “nothing about a 3.7% unemployment rate and another 199,000 jobs … even whispers ‘recession,’ let alone screams it,” writes CNBC’s Jeff Cox.

“Overall, the jobs market is doing its part to get us to a soft landing,” said Daniel Zhao, lead economist at jobs review site Glassdoor. “It’s boring in all the right ways.”

Adding to the positive mood is the University of Michigan consumer sentiment survey. The November edition showed consumers expect inflation to drop to 3.1% in a year and hover around 2.8% in five years. Those are drastic falls from their expectations in the previous month.

And it’s important to note expectations aren’t just abstract ideas. They influence real-world prices because consumers and businesses act according to their beliefs.

The combination of falling inflation expectations and a pick-up in consumer sentiment support a soft-landing outcome, said Michael Arone, chief investment strategist at State Street Global Advisors. “As long as the soft landing outcome stays intact, the bias for stocks and risk assets remains positive.”

Indeed, markets cheered the reports on Friday. The S&P 500 rose 0.41%, the Dow Jones Industrial Average climbed 0.36% and the Nasdaq Composite advanced 0.45%. All major indexes ended the week in the green, with the S&P and Dow wrapping up six consecutive weeks of wins, their longest since 2019.

Investors will turn their attention this week to the consumer and producer price reports — and the Federal Reserve’s final meeting of 2023 — all of which will offer more clues on whether a soft-landing scenario is truly in sight.

— CNBC’s Jeff Cox contributed to this report.