Stocks fell for the week amid thin trading volume and anemic news flow, which included some encouraging economic reports in the U.S. and decent Italian bond auctions that helped eased jitters in Europe surrounding Italy’s funding needs over the next few months.
The week also brought weaker than expected Chinese PMI, which highlighted the slowdown in the Chinese economy. The week capped a volatile year, which was dominated by news of the European debt crisis, natural disasters, sovereign credit rating downgrades, including the first ever U.S. downgrade that resulted after the lack of leadership and political brinkmanship in Washington, preventing politicians to come up with a sensible plan to address the U.S. ballooning debt problem.
The biggest threat is that the debt crisis in Europe might finally implode and push Europe into an economic recession that would spread around the world to include the U.S. The markets in Europe and Asia seem to have factored that possibility into stock prices with their bear markets of 2011.
However, encouraging assessments regarding the euro zone debt crisis have begun creeping out from under the year’s overwhelmingly negative headlines, with some economists now predicting the crisis will be contained by recent measures undertaken by the EU and ECB, and will be more permanently resolved by mid-2012.
If markets in Asia and Europe begin to factor in a positive outcome, or even just that the crisis will be kicked down the road again, their bear markets would likely end and be replaced with new bull markets. That would free the U.S. market from the drag that has been on it, and the U.S. market rally could indeed have further to run, with global markets moving in tandem again giving it a further push.
The release of the data this week will be as follows:
Monday Jan. 2:
Both economies lack economic fundamentals which propose that there would be calm trading on the pair which is predicted to follow the general trend in market as it will not able to get direction from data.
Tuesday Jan. 3:
As of 09:30 GMT, U.K. PMI manufacturing will show a widening contraction to 47.3 in Dec. from the prior 47.6.
In the U.S., at 15:00 GMT, ISM manufacturing for Dec. is expected to show a widening expansion to 53.2 compared with Nov. reading of 52.7, noting that a reading above 50 means expansion and vice versa. At 19:00 GMT, eyes will be in the minutes of the FOMC meeting.
Wednesday Jan. 4:
At 09:30 GMT,U.K.construction is set to show a drop to 52.0 in Dec. from 52.3 in Nov., according to PMI gauge. At the same time, mortgage approvals, M4 money supply and net lending for Nov. will be due.
Thereafter, eyes will be on MBA mortgage applications for Dec. 30 at 12:00 GMT, which will be followed by factory orders at 15:00 GMT with expectations referring to a 2.0% rise in Nov. compared with the prior 0.4% drop.
Thursday Jan. 5:
As of 09:30 GMT, U.K. PMI services will show a narrowing expansion to 51.5 in Dec.
The U.S.economy will release ADP employment change at 13:15 GMT, where it is expected to decrease to 175,000 in Dec. from the previous 206,000, while initial jobless claims for the week ending Nov. 26 and continuing claims for the week ending Nov. 18 will be available at 13:30 GMT. At 15:00 GMT, ISM non-manufacturing for Dec. is expected to show a widening expansion to 53.0 compared with Nov. reading of 52.0.
Friday Jan. 6:
The week ends with the release of the awaited non-farm payrolls report from the United States, due at 13:30 GMT. Expectations refer that change in non farm payrolls will reach 150,000 in Dec. from the previous 120,000 while unemployment will rise to 8.7% from 8.6%.
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