Week ahead: US Employment likely to drive market sentiment this week

US Employment is one of the most awaited data this week, and it is very likely to drive market sentiment across all kinds of assets in the financial market. The ISM data coming from the US could add more information on how the US economy is doing lately. From Europe, the release of PMI data from several countries as well as the unemployment rate, can help to understand the next possible steps in the macroeconomic policy to be adopted by the ECB. Australia’s GDP is also on the radar this week.

Here are the week’s key events:

Monday, Dec 2nd: PMI from Europe and US

The day begins with the release of manufacturing PMI data from Spain, Switzerland, Germany and the Eurozone. This indicator will be closely watched, especially amid signs of a slow recovery in the European bloc. A reading below 50 would usually indicate contraction, while numbers above that suggest expansion. The market will be watching the performance of the PMI from Germany, Europe's largest economy, which has been showing constant readings below 50 since 2022. In the afternoon, the US manufacturing PMI will be released. With readings below 50 in recent months, if the manufacturing PMI comes in higher than expected, it could strengthen the dollar and put pressure on global stock markets due to the possible continuation of a tighter monetary policy by the Fed. The unemployment rate in Europe has been on a constant downward trend in recent months, and the last reading was 6.3% (the best number since the beginning of the pandemic). If the reading comes lower than 6.3%, this could give the ECB room to take more restrictive monetary policy measures in the coming months.

Tuesday, December 3rd: Australia GDP

The JOLTS job openings will be the highlight of the day. This often overlooked data point has become increasingly relevant in assessing the Federal Reserve’s monetary policy, as it helps to understand one of the key indicators of economic health in the U.S.: the labour market. An unexpected rise in job openings would indicate that the U.S. economy is running hotter than expected, which could end up complicating the Fed’s efforts to contain inflation. On the other hand, falling numbers could ease concerns about inflationary pressures and support interest-sensitive technology stocks. Australia is due to release its GDP, and as it’s been decreasing in the last readings, the market will watch those numbers closely.

Wednesday, December 4th: ADP and PMI in the US

Two critical indicators will shape market sentiment on Wednesday: Private Employment Change (ADP) report: Serving as a precursor to the official employment report (NFP), the ADP is expected to offer early insights into the strength of the U.S. labor market in November. The last 2 readings of the ADP showed better-than-expected numbers, and if that happens again, it could strengthen the US dollar against its counterparts in the short term.
The other indicator is the Non-manufacturing ISM: This is a key barometer for measuring the health of the services sector, which accounts for the bulk of the U.S. economy. As this indicator has been showing consistent readings above the 50 level, it shows that the service sector is strong in the US, which could, again, favor the Dollar.

Thursday, December 5th: Housing sector in UK

The UK construction PMI will be closely watched after months of volatility in the sector. As the Bank of England started cutting interest rates in the last meetings, it is expected that the construction sector will possibly rise in the coming months, generating more jobs in the short term. On the other hand, a lower-than-expected figure could suggest a broader slowdown in the UK housing sector, which could make the BOE further its policy to cut interest rates in the future. In the US, the Initial Jobless Claims will provide further insight into the health of the labour market. A lower-than-expected reading will keep pressure on the Fed, while an unexpected rise could boost the stock market on expectations of earlier rate cuts to stimulate the economy.

Friday, December 6th: NonFarm Payrolls in the US

The nonfarm payrolls report (NFP) will be the big event of the week, as usual. Markets are expecting moderate job growth in November, following strong readings in previous months. The market is particularly nervous about the NFP data because the previous reading came in at just 12k, one of the lowest readings since January 2021, when the NFP was negative for the last time. If job creation is too low, it adds a lot of pressure on monetary policy, as the Fed needs to address inflation while simultaneously stimulating the economy and job creation. A worse-than-expected number could force the FED to cut rates in the short term, which could make inflation gauge again.

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