[B]Non Farm Payrolls to finish off busy first week back[/B]
Morning all,
The first week of the new year is nearly over and for very many it is not going to be a week that they quickly forget. With oil prices dropping below $50 a barrel, deflation finally in the Eurozone and some huge swings in equity and currency markets you could have been forgiven for thinking there had been no festive break at all. The week is not yet over in terms of the volatility either as later this afternoon we will see the release of the US non-farm payroll number within the jobs report. However before we get there we have seen inflation data from China overnight which has shown inflation hit a 5 year low falling to 1.5%, well below the government’s target of 3.5%. Yet again, and very much like the Eurozone number earlier this week, a main driver of the fall has been to do with the incredibly week oil price. However regardless of the oil price fall the fact that domestic prices are also so week is of course a cause for concern for China, with growth still struggling then ultra low inflation and global growth fears could well cause more jitters yet as we move into next week.
The last session of the week is set to be a fairly busy one on the economic calendar as traders also try and decide how to position themselves over the weekend after what has been a tumultuous week. Obviously there will not be too many traders moaning about the volume and volatility that has returned to global markets this week, however just how successful the week has been may well decide just how much risk people are willing to take on as we head in to the payroll figure later this afternoon. It has been a week where many have looked to take the risk of trade with many still dumping the pound and the euro in favour of the US dollar and gold. However equity markets have been mixed throughout the week, including a real mixed bag for some of the retailers in the UK on what has now been dubbed (as we can’t help but name days) super Thursday for the retail industry. This morning will see numbers out of the UK again today with industrial and manufacturing production as well as trade balance figures. It seems that the UK is actually sitting in a bit of a sweet spot at the moment in terms of the economy. With ultra-low prices and low petrol prices meaning the general public can happily put their hands in their pockets and spend money. While on the other hand strong growth figures are coupled with improving unemployment and Average earnings numbers and a falling deficit. It is rarely that things look positive for both electorate and government, but there is also no better time for this to happen than in the run up to a general election.
So on to the payrolls and what is expected , we are looking at a number around 240K this afternoon when we get the reading. This would be a long way below last month’s surprise jump over 300K and could cause a bit of disappointment. However Decembers number is always that little bit lower due to seasonal effects, however with the US economy well on track and the Fed happy with the state of monetary policy it could well be that this number does not actually hold much significance, unless drastically lower. Personally I think we could see a better number yet again, which along with positive numbers all over the economy is going to lead to earlier than expected rises in interest rates with my prediction being that we could well get the first rate hike by March. Whenever it is we get the first rate hike however it is not going to be unemployment that is an issue as today will most likely show that the job market in the US continues to improve and is doing so at a pretty fast rate.
Ahead of the open we expect to see the FTSE open lower by 6 points with the German DAX lower by 20 points.