January may not be positive if U.S. data further slips
Despite a positive rally for Crude Oil in the final hours of the last trading session in 2015, where WTI Crude closed higher with a 1.20 percent gain and Brent added a little over 2.25 percent in gains, U.S. and global equities took another hit as the first U.S. weekly data coming out of 2016 were not encouraging.
In the U.S., the DowJones Index lost more than 1 percent, S&P500 fell by 0.95 percent and even the Nasdaq Composite Index lost 1.15 percent. In Europe, things didn’t fare any better as Germany’s Dax 30 Index dropped by 1.10 percent and France’s CAC40 retreated by more than 0.95 percent. Such declines come on the back of shocking economic data from the U.S., where financial commentators have rapidly adopted to the new term: “Policy Error.”
Those figures have not only affected U.S. markets, but are also expected to impact the Arab Gulf markets.
Three Shocking Figures from the U.S.
First, Pending Home S ales figures unexpectedly declined by nearly a percentage point, (0.9 percent), despite the fact that market estimates were eyeing a rise of no less than 0.7 percent. Second, U.S. Weekly Jobless Claims figures showed the highest increase in more than three months, rising to 287,000 up from 267,000. That is the largest weekly increase since February 2015.
Thirdly and most importantly, the Chicago PMI Index tumbled further towards the recession area, declining sharply to 42.9 down from 48.7, despite the fact that the estimates were for it to rise towards 50. This is the lowest reading since July 2009. Any reading under 50 indicates a contraction.
Markets This Week
As for the week ahead, the hopes are high for a positive start in 2016, especially with Crude Oil prices closing higher on the last trading day of 2015.
However, this might not continue for long, especially with the disappointing global economic figures. Minds will be focused on how business conditions will fare this week, including the Manufacturing PMIs across the board, including Asia, Europe and the U.S.
Moreover inflation data from the Euro Zone will also be in the spotlight, including both the CPI and Core CPI Flash Estimates, which are expected to rise by 0.4 percent and 1.0 percent respectively.
In addition, traders will be waiting for the FOMC Meeting Minutes, which is the first meeting minutes after the first Fed Fund Rate hike on Dec 16, 2015. The FOMC Meeting Minutes could move the markets this coming week.
Another market mover event this week will be the U.S. Jobs Report expected out on Friday, January 8, 2016, covering the month of December, 2015. The U.S. economy is expected to add more than 200,000 jobs in December, while the unemployment Rate is expected to remain stable at 0.2 percent. Any disappointing reading will increase the level of fear regarding the veracity of the Fed’s decision. The last thing the markets need at the beginning of 2016 is to lose confidence, so traders are hoping for better global data. Otherwise, global equities might not see a rosy January.