While Friday’s non-farm payrolls numbers were better than expected
the subsequent rebound in European markets still wasn’t enough to stop Europe’s markets posting their largest weekly drop since the end of August.
The reaction of US markets was slightly more ebullient
but that’s been the case for quite some time now given the almost weekly case of new all-time highs and Friday’s rally almost wiped out all the week’s losses.
As for Europe
we look set for a fairly positive start to the week helped in no small part by some positive Chinese data over the weekend
, which saw exports jump sharply in November by 12.7%
, helped by a strong performance to the EU and US markets.
Friday’s better reading of 203k new jobs
in November shouldn’t really have been a surprise given that on a seasonal basis November generally tends to be a fairly strong month, due to Thanksgiving. The headline number was the sharp fall in the unemployment rate which fell to 7%, while the labour participation rate edged off its 35 year lows, back to 63%.
Some have suggested that the rally in US stocks was as a result that while the jobs numbers were good they weren’t good enough to suggest that a Fed tapering was imminent. Given that the Fed has a dual mandate the fairly weak inflation numbers may also have played a part, given that they were released at the same time.
Indeed we’ve already heard St. Louis Fed President Bullard articulate recently
that the FOMC have concerns about falling prices, and we could well get further guidance on that later today at a speech he is giving in St. Louis at 6pm UK time.
Only a few weeks ago he stated that he favoured an enhancement of the Fed’s guidance in the context of a low inflation environment
, which could well affect any decision when the Fed meets next week.
After a data heavy week last week, this week promises to be a little lighter
, but there are still some important items that deserve attention, including the latest Chinese industrial production and retail sales data, UK industrial and manufacturing production data
for October, some key note speeches from Bank of England governor Mark Carney and two speeches by ECB President Mario Draghi
, as well as US retail sales for November which could well give a steer on the prospects an improvement in Q4 for the US economy.
Also in Europe
we get the latest Q3 GDP numbers from the long suffering Greek economy
in the wake of the new budget for 2014 which was passed over the weekend. In it the Greek Prime Minister Samaras predicts a return to growth next year
, which seems once again more an aspiration than a realistic probability.
The OECD and a host of other forecasters have a rather more sombre view
with another contraction predicted. The Greek Prime Minister points to the fact that Greece will soon post a primary surplus, which may be true but that’s fairly easy to do if you don’t pay your bills to the private sector. Unemployment remains eye wateringly high and is likely to remain so for some time.
At the same time European finance ministers are once again set to meet
to discuss the next steps towards banking union, though the subject of Greece may well also be discussed as the country looks to secure its next aid payment.
– the euro has finally broken through the resistance at 1.3650 and looks set to push on towards long term trend line resistance from the all-time highs at 1.6040 which comes in at 1.3940. In the short term there could well be some selling interest at the October highs at 1.3815.
Any dips seem likely to find support at 1.3620 Only a break below the 1.3480 level would then argue for a move to the lows last week at 1.3400, and then below that 1.3300.
– despite a slightly lower low at the end of last week at 1.6294 the pound remains solidly above support at the 1.6250 level. While this level remains intact then the potential for a move to 1.6520 remains. Only below the 1.6250 support would argue for a retest of pivot support at 1.6110, a break of which argues for a move back to the multi week support at 1.5880/90.
– another short squeeze looks to be in progress here but as long as we stay below the highs of the last four weeks at 0.8415, the downtrend remains intact. For the move towards 0.8170 to play out we need to see a move back below the 0.8320 area, which acted as initial resistance after last weeks low at 0.8250.
– Friday’s sharp rally off 101.60 saw the US dollar reverse the previous 3 days losses and keeps the prospect of a move towards 103.75 on the table. Only a move above 103.75 argues for a move towards 105.00. Dips once again need to stay above the 100.60 area for the move higher to continue to play out.
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