- Eurozone Investor Confidence Index likely to rebound in January
- Unemployment in the Eurozone on track to hold steady in November
- US Labour Market Conditions Index may raise warning flag for the economy
Eurozone data is in focus today, starting with the Sentix Investor Confidence Index for January, followed by the unemployment rate for November.
Later, the Federal Reserve publishes December figures for its US Labor Market Conditions Index, which will be widely read in the wake of Friday’s softer-than-expected rise in nonfarm payrolls.
Eurozone: Sentix Investor Confidence (0930 GMT): Survey data points to a pick up in economic growth for the countries that share the euro.
Will the hard data corroborate the upbeat outlook? The record has been mixed so far, but the tide may be set to turn if today’s Sentix release firms up.
The trend in survey data lately has certainly certainly been encouraging. The Eurozone Composite PMI ticked up to a five-year high in December, implying that GDP growth in the fourth quarter will rise to a 0.4% quarter pace, up from 0.3% in Q3.
The European Commission’s Economic Sentiment Indicator increased last month too, also rising to a five year high.
Meanwhile, Now-casting.com’s on Friday reported that its weekly estimate of Q4 GDP growth for the Eurozone inched up to 0.49%, matching the expected rate via the Euro-Coin Indicator’s December forecast.
The buoyant numbers suggest that today’s January reading for the Sentix Investor Confidence Index will rise as well. So, too, does the recent advance in the major stock markets in Europe.
The Euro Stoxx 50 Index – a benchmark of Eurozone blue chips - closed last week at its highest level in over a year.
There’s still room for debate on whether the hard data in the weeks ahead will confirm the latest rebound in expectations for the macro trend.
But for the moment, given the current tailwind in expectations, it’s likely that today’s Sentix release will join the party for projecting stronger growth.
Eurozone: Unemployment Rate (1000 GMT): TradingEconomics.com’s consensus forecast sees the jobless rate holding steady at 9.8% in November, the lowest level since 2009.
Although that's still high, the downside bias in recent months holds out the possibility that a downside surprise is possible.
“The economic data released since this year has painted a very much optimistic picture for the economic growth,” said the chief market analyst at ThinkMarkets. “This also confirms that the European Central Bank’s loose monetary policy is also providing strong tailwind.”
Some analysts say that the encouraging numbers for the Eurozone (including firmer inflation, which climbed to a three-year high in December) may soon convince the European Central Bank (ECB) to start squeezing monetary policy.
But ECB director Yves Mersch last week said it's premature to start raising interest rates. "Statistics from just one month is not going to change our position," he reasoned.
US: Labor Market Conditions Index (1500 GMT): Employment growth slowed in December, for the monthly and annual comparisons. But if the trend is cooling, the pickup in wage growth cheered analysts.
“It’s a very strong job market overall,” noted the chief economist for Raymond James Financial.
“There’s a further tightening in labor-market conditions. Wage pressures are certainly building, and we should continue to see further upward pressure this year.”
Perhaps, but the US treasuries market focused on the softer-than-expected growth in nonfarm payrolls for December.
The 2-year yield, the most sensitive for rate expectations, fell slightly last week, settling at 1.20% - a two-month low.
But if the labour market’s wobble is a genuine warning sign for the economy, today’s December update for the Federal Reserve’s Labor Market Conditions Index (LMCI), a broad measure of the jobs market, may confirm that trouble’s brewing.
TradingEconomics.com's econometric forecast, however, doesn’t see serious trouble ahead.
The prediction calls for slight decline in LMCI to 1.3 from 1.5 in November. Using that forecast as a guide, the index will hold at a positive reading for the fourth straight month - the longest run above zero in over a year.
That alone is no assurance that the labour market will continue to expand, but it at least keeps the odds modestly bullish.
Disclosure: Originally published at Saxo Bank TradingFloor.com