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by Darius Anucauskas

Weekly Outlook: Dec 31 – Jan 04: Some G10 PMIs and US Employment Data

With the holiday season over in the middle of the week, the markets get back into full swing on Wednesday. China, the eurozone and the US will hit the spotlight with the release of their manufacturing PMI figures. And, of course, the New Year will kick off with Friday’s US NFP numbers.

On Monday, some of the markets around the world are closed and some will have a half day. But the US market will be open as usual and have a full trading day. In terms of economic data, during the early Asian morning, we got, what’s probably the only important data for that day, which are the Chinese manufacturing and non-manufacturing PMIs. The manufacturing sectors has contracted for the month of December, going from the previous 50.0 to 49.4, where the expectation was sat at 50.0, as the November number. The non-manufacturing sector performed slightly better in December. It managed to beat, not only expectations, which were at 53.2, but also the previous figure of 53.4. The number came out 53.8, which means that the non-manufacturing sector is still performing well.

On Tuesday all the markets are closed. Happy New Year!

Wednesday will start off with the release of the Caixin manufacturing PMI number from China, which measures the state of the country’s manufacturing sector. China needs a reading above 50, in order to see the sector expanding. The previous number came out at 50.2, but it is forecasted that the December figure could come out by a tick higher, at 50.3, which is a good sign.

Some big European countries will deliver their manufacturing PMI numbers for the December as well. Countries like Germany and the United Kingdom will show if their manufacturing sectors have grown or contracted. The German figure is expected to come out the same, at 51.5, whereas the UK one is forecasted to have dropped from 53.1 to 52.6, which is something that the British government doesn’t want to see right now, given all the tensions around Brexit. In addition to that, the eurozone will provide its overall manufacturing PMI, which is expected to have stayed the same at 51.4. This means that the sector, overall, is still expanding. Later on in the day, the US will release their manufacturing PMI number, which is currently expected to come out the same as previous, at 53.9.

Thursday should be an interesting day for UK, as the country will tell us how its construction sector has performed in the last month of 2018. According to the estimates, economists and analysts expect a small decrease in the number, going from the previous 53.4 to 52.9. The number above 50 still means that the sector is expanding, but if it comes out lower than the previous number, this will break the pattern of rising construction PMIs since September.

But everyone’s focus will be on the data, which we will get before the US opening bell, which is the ADP non-farm employment change for the month of December. The expectations are that the figure might come out almost the same as the previous 179k, just by a tick higher, at 180k. Certainly, some analysts could try to equate that to Friday’s NFP release, but we would like to remind our readers that, even though the two data releases are similar, still, one should not base their judgement of the upcoming NFPs from the ADP report.

US will also provide us with the ISM manufacturing PMI number for the month of November. The manufacturing PMI is expected to have declined from 59.3 to 58.2. But if the release will show a slightly better than expected number, but lower than the previous, then this could still mean that economy is on the right track, but with a small seasonal adjustment to the downside.

Finally, Friday should be the most exciting day of the week, as we will get the above-mentioned Non-farm Payroll numbers. In the last release in the beginning of December, the figure came out at 155k, which is not only well below than the expected 200k, but also below the previous adjusted 237k. This time the forecast is somewhat more positive, as it is believed that it could reach 181k for the month of December. Given that it was a holiday period and there tends to be a requirement for temporary workforce during that time, then we could expect the number to be higher, at least then the previous figure. But if we take into account the pattern that has been in place for the past two Januaries in a row, the number can come out higher than the previous month’s one, but it tends to fail in beating expectations. In addition to NFPs, investors will be on lookout for the overall unemployment rate and the average hourly earnings, both for December. The unemployment rate is expected to have remained the same, at 3.7%, whereas the average hourly earnings are forecasted to have declined by a tick, going from 3.1% to 3.0% on a YoY basis, but the MoM number is expected to have risen by a tenth, from 0.2% to 0.3%.

Canada is set to release its employment numbers as well. Their unemployment figure is expected to have increased from the 5.6% to 5.7% for December. If that’s the case, this would be the same, as last year’s December number, which came out at 5.7%.

But even before we start getting data from North America, Europe will show us how its preliminary inflation has shaped up in December and how the eurozone’s service sector performed in the same month. The preliminary inflation on a YoY basis is expected to have declined a bit, from +1.9% to +1.8%. The service sector is forecasted to have continued expanding at the same pace as the previous month, with the index sitting at 51.4.

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