The Week Ahead
The FOMC minutes (Wed), US employment report (Fri), and PMI and inflation readings for major economies kick-off the first full week of the year. Later today we have US factory orders and the S&P Global services and composite PMI prints. Eurozone CPI, and US job openings, trade date and ISM services are due on Tuesday. Eurozone PPI and consumer confidence follows on Wednesday, and later the US ADP employment and consumer credit figures will garner market focus. China’s CPI and PPI prints kick-start Thursday, and later we have Germany industrial production and eurozone retail sales. On Friday we have the US non farm payrolls figure, currently expected at +160 jobs, while employment is forecast to stick at 4.2%.
Central bank chatter includes the Fed’s Cook (Mon), Barkin (Tue and Thu), and Harker and Schmid (Fri). The ECB’s Galhau (Wed), and the BoE’s Woods and Bailey (Wed) and Breeden (Thu).
Over the weekend we heard from Fed officials Kugler and Daly who both emphasised that while their fight against inflation isn't complete, they want to avoid harming the strong labour market in the process. Both policymakers indicated satisfaction with the current 4.2% unemployment rate and suggested they prefer a gradual approach to future policy adjustments, even though inflation remains above the Fed's 2% target. The Fed Funds pricing is currently quite hawkish, at less than 10% chance of a cut at the FOMC meeting later this month.
During the holiday shortened week we had some mixed data out of the US, mortgage applications fell in December, and jobs data missed expectations. In contrast, manufacturing improved, however both the S&P Global and ISM manufacturing PMIs remained in contraction. Interestingly, the ISM employment component dropped to 45.3, from 48.1.
Elsewhere, China’s official PMIs showed an improvement in non-manufacturing sectors, and the manufacturing survey, while still in expansion territory, was marginally lower. Later the Caixin manufacturing missed expectations, and this morning the Caixin services PMI surprised to the upside at 52.2. Last week, the People's Bank of China (PBoC) announced plans to cut interest rates this year and make a significant shift in its monetary policy approach. The central bank aims to move away from its traditional system of setting multiple interest rates and giving unofficial loan guidance to banks, towards adopting a more orthodox approach similar to the Fed and ECB by focusing primarily on interest rate adjustments to manage the economy.
Wishing you a very Happy and Prosperous 2025.
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