With US and European equity markets struggling for direction near multi year highs over the past few days, this week’s focus has been primarily on earnings announcements from companies on both sides of the Atlantic, alongside the occasional growth upgrade from various economic bodies.
Last week we got an upgrade from the World Bank on global growth, and yesterday the IMF followed suit in a similar vein.
Equity investors however seem rather unsure in the absence of significant economic data from either the Europe or the US, ahead of next weeks Fed meeting, as company earnings numbers come in thick and fast, and to a greater extent, rather underwhelm expectations.
Meanwhile in Davos
, economists, business leaders and global leaders get started at the latest World Economic Forum, in an attempt to find solutions to some of the most pressing economic problems around the world.
Financial markets will, in the absence of any other inputs, have their focus on the UK
once again as we get a raft of economic data including the latest unemployment numbers, the latest Bank of England minutes, as well as average earnings data and the latest borrowing numbers for December.
At the end of last week we heard MPC member Ben Broadbent
indicate that he expected to see real incomes start to converge with prices, and that he thought that there were signs that this was starting to happen. We shall soon see in the coming months, though today’s average earnings numbers might be too soon given that they are for the three months to November, however we are expected to see a rise to 1.1%, from 0.9%.
The latest ILO unemployment numbers
for the three month period to November are also likely to be closely scrutinised given the previous months sharp fall from 7.7% to 7.4%.
Could we see a similarly sharp fall in today’s numbers, particularly given that the month on month numbers for September and October both came in at 7.1%?
If the monthly number for November is similarly low, and there aren’t any revisions to previous months, we could find ourselves within touching distance of the Bank of England’s 7%
“staging post” two years early.
Expectations are for a fall to 7.3%,
but it certainly wouldn’t be a surprise to see a bigger fall than that to 7.2%.
The claimant count for December
is expected to show a drop of 33.8k, slightly down from November’s 36.7k.
Also out at the same time we have the latest Bank of England minutes
and markets will be particularly attuned to any concerns the MPC have with respect to the value of sterling which continues to push higher across the board, with some companies, blaming the recent rebound in the pound in reducing their profitability, Royal Dutch Shell being a case in point.
A good unemployment number will only reaffirm those concerns, and will certainly present a challenge for Bank of England governor Mark Carney and the MPC in managing the forward guidance
next month The Bank may have to do a Fed, and change the guidance and only consider rate hikes until the unemployment rate is well below 7%.
Public sector borrowing
is expected to come in at £12.8bn in December, down from £14.8bn in November.
– the euro continues to sit below the 100 day MA despite being unable to dip too far. This weeks low at 1.3505 remains a support level.
While below the 100 day MA keeps the pressure on the downside and a potential test towards the 1.3300 area and November lows over the next few sessions, after failing to overcome the 1.3700 area last week. A concerted move below 1.3520 and the December lows could well be the catalyst for such a move.
– having pushed above 1.6460 yesterday we could well be set for another move towards the recent highs at 1.6600. The first obstacle sits on the right shoulder of the potential head and shoulders formation at 1.6520. Only a break below 1.6250 signals a top is in and the potential for a move lower towards 1.6000. Above the 1.6520 level negates the pattern and argue for a return towards 1.6620 and even 1.6740.
- another one year low yesterday at 0.8215 keeps the onus on the downside and the move towards the 0.8160/70 level.
The risk of a rebound will always be a concern with 0.8270 the initial resistance. The continued lack of conviction does suggest we could well get a move towards the longer term objective at 0.8160/70.
– recent rebounds keep finding resistance at 104.75 trend line resistance from the recent highs at 105.50. A move back below 103.70 could well signal a return to the lows last week at 102.90 on the way to a move towards 102.00. Only above 105.50 argues for a move towards 108.00.
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