The eurozone’s flash inflation data and the US non-farm payroll will be in the spotlight of the global markets this week.
ADVERTISEMENTGlobal markets are set to return to a normal trading week following the holiday season. Wall Street failed to achieve a Christmas rally as profit-taking caused a broad-based pullback.
Last week, markets extended the trends from the year-end, with the US dollar continuing to reach a fresh two-year high, and the global stock markets were in a retreat.
In Europe, rising energy prices, particularly natural gas, may exert upward pressure on inflation and weigh on the euro. However, gains in oil and gas stocks have partially offset losses in other sectors.
This week, the spotlight will be on the eurozone’s flash inflation data for December, which could influence the European Central Bank’s (ECB) monetary policy stance.
Meanwhile, US non-farm payroll data will provide key insights into the labour market and guide expectations for the Federal Reserve’s next rate decisions.
Europe
The Eurozone inflation will likely tick up in December according to consensus estimates. In November, the headline consumer price index came in at 2.2%, up from 2% in the previous month.
Consumer price is expected to continue increasing by 2.4% in December. The core inflation, excluding volatile items such as food and energy, is forecast to remain at 2.7%.
Preliminary inflation readings from Germany, France, and Italy will also be released, with all expected to reflect an upward trend. The ECB indicated that inflation was on track to achieve the 2% target at some point in 2025.
Economists expect the bank to further reduce the interest rate by at least 100 basis points this year. However, rising energy prices and uncertainties surrounding Trump’s presidency could complicate the outlook.
Additionally, Spain and Italy will release their services PMIs for December. Consensus forecasts suggest improvements, with Italy’s business activity potentially returning to expansion following a sharp decline in November.
Final services PMIs for France and Germany are also due, with both expected to align with flash estimates. Preliminary data indicates that France’s services sector experienced a downturn for the fourth consecutive month in December.
United States
The US job data remains a key focus for the global markets, providing clues for the Fed’s future rate decisions. In November, the United States added 227,000 new jobs and the unemployment rate rose to 4.2% from 4.1% in the previous month.
Consensus forecasts that non-farm payrolls may have increased by 153,000 in December and the jobless rate has stayed at 4.2%. These figures suggest a cooling labour market and that the Fed should continue its easing cycle.
The FOMC meeting minutes will also be critical for investment sentiment. The Fed shifted to a more hawkish stance when it cut the interest rate in December as employment data proved stronger than anticipated in recent months.
The Fed’s dot plot now projects a 50 basis point rate cut in 2025, down from the full percentage point cut forecast in September.
ADVERTISEMENTAsia-Pacific
In Asia, China will be due to release its CPI and Producer Price Index for December. Consumer prices rose 0.2% year on year in November, down from 0.3% in the previous month, and was the softest increase since June.
Consensus forecasts that CPI for December will increase by 0.1%, suggesting that the world’s second-largest economy remains under disinflationary pressure due to sluggish consumer demands.
The producer price dropped by 2.5% year-on-year and was in deflation for the 26th consecutive month in November. The data is expected to continue the trend in December.
Australia is also set to release its monthly CPI for November. Consensus forecasts that inflation may have slightly ticked up to 2.2% from 2.1% in the previous month.
ADVERTISEMENTMany economists project that the Reserve Bank of Australia will commence the easy cycle by cutting its rate by 25 basis points in May 2025.