Global equity markets were largely flat over the week ended December 5. Investors took a relatively cautious approach before the U.S. Federal Reserve Board’s (Fed) interest rate decision on December 10. There were few economic catalysts over the week. The S&P/TSX Composite Index declined. Utilities was the worst performing sector. U.S. equities posted a small gain. Yields on 10-year government bonds in Canada and the U.S. increased. The price of oil rose over the week, while the price of gold fell.
Canada’s unemployment rate drops
Canada’s economy added 53,600 jobs in November, surprising economists who were expecting a 2,500 decline. November’s increase adds to the 66,600 job additions in October. The participation rate fell to 65.1%, matching the August 2025 level, which is the lowest since 2021.
This marks the third consecutive monthly increase, driven by a rise in part-time jobs. Conversely, full-time employment declined for a second straight month, losing 9,400 jobs.
Robust job gains were seen in the health care and accommodation and food services industries. On the other hand, the number of retail trade jobs declined.
Canada’s unemployment rate declined to 6.5% in November from 6.9% in the previous month. Economists were expecting an increase to 7.0%. This is Canada’s lowest jobless rate since July 2024.
The Bank of Canada (BoC) makes its final interest rate decision of 2025 on December 10. Relatively solid labour market conditions and contained inflation may keep the BoC on the sidelines regarding interest rate decreases at this meeting.
Elevated inflationary pressures in the U.S. persist
The personal consumption expenditure price index (PCE) increased to 2.8% year over year in September from 2.7% in the previous month, matching expectations. The release of this data was delayed in response to the U.S. government shutdown.
Annual core PCE moderated to 2.8% in September from 2.9% in August.
Personal spending grew by 0.3% in September, which was the smallest increase in four months. September’s growth was driven by spending on services. Goods-related expenditures also increased, albeit at a tepid pace.
Meanwhile, data pointed to a slowing labour market. ADP reported that private businesses in the U.S. lost 32,000 jobs in November, marking the largest decline in over two years. A separate report showed there were 71,321 announced job cuts in November, representing a 23.5% year-over-year increase.
The Fed is expected to lower its policy interest rate this week. While inflation remains above target, a slowing labour market is concerning Fed officials. The target range for the federal funds rate currently sits at 3.75%–4.00%.
European price growth ticks higher
A flash estimate showed Europe’s annual inflation rate rose to 2.2% in November from 2.1% in the previous month.
Contributing to the increase was a rise in services prices, which increased at its fastest pace since April. Services sector activity picked up in November, expanding at its quickest pace since May 2023. The services sector has been a key driver of growth for Europe’s economy.
Producer prices rose for the first time in three months, rising by 0.1% in October.
Retail sales stalled in October, posting no growth (0.0%). This marks four straight months of tepid retail sales growth, with consumer confidence at low levels amid economic and trade uncertainty. European consumers appear to be taking a relatively cautious approach to spending in the current economic environment.
The European Central Bank (ECB) makes its final interest rate decision of 2025 on December 18. The ECB has held interest rates steady at three consecutive meetings, believing that monetary policy is in a good place, with inflation largely contained and the economy proving resilient. A third and final reading showed Europe’s economy grew by 0.3% in the third quarter, up from the second quarter.
China’s manufacturing momentum stalls
Manufacturing activity in China pulled back, posting a slight contraction in November, its first since July.
The RatingDog China General Manufacturing Purchasing Managers’ Index dropped to 49.9 in November from 50.6 in the previous month, missing economists’ expectations.
Output and new orders were essentially unchanged. However, employment declined, weighing on the industry. On a positive note, foreign orders did increase, helped by easing trade tensions with the U.S.
China’s services sector activity expanded again in November, albeit at a slightly slower pace than in October. Overall, private business activity grew at its slowest pace since July.
China’s economy is still struggling for traction. The tariff truce with the U.S. should help increase industrial activity, but soft domestic demand may continue to weigh on economic growth. The calls for more government stimulus measures persist.
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