Global markets are set for a full trading week following the holiday season, with a key focus on Eurozone inflation and US job data.
Last week, Wall Street missed out on a Christmas rally as profit-taking led to a broad-based pullback. The US dollar continued to hit a fresh two-year high, while global stock markets retreated.
Rising energy prices, especially in natural gas, are expected to exert upward pressure on inflation in Europe and weigh on the euro. However, gains in oil and gas stocks have helped offset losses in other sectors.
This week, the eurozone’s flash inflation data for December will take center stage, with expectations of a slight increase. November’s inflation came in at 2.2%, up from 2% in October, and December’s consumer price index is forecast to rise by 2.4%. Core inflation, excluding volatile items like food and energy, is expected to hold steady at 2.7%. Preliminary inflation figures from Germany, France, and Italy are also expected to show upward trends.
In the US, the non-farm payroll data will provide vital insights into the labor market, which could influence expectations for the Federal Reserve’s next rate decisions. Consensus estimates suggest 153,000 new jobs were added in December, with the unemployment rate holding steady at 4.2%. This would signal a cooling labor market, suggesting the Fed may continue its easing cycle.
The release of the Federal Open Market Committee (FOMC) meeting minutes will be another key event for market sentiment, as the Fed recently shifted to a more hawkish stance, cutting interest rates in December amid stronger-than-expected employment data. The Fed’s dot plot now indicates a 50-basis-point rate cut in 2025, down from a full percentage point in September.
Additionally, Spain and Italy are set to release their services PMIs for December, with improvements expected, particularly in Italy, where business activity could return to expansion. The final services PMIs for France and Germany are also due, with France’s services sector expected to have contracted for the fourth consecutive month in December.
As these economic indicators unfold, they will play a crucial role in shaping market expectations for monetary policy decisions in both Europe and the US.
