Global stocks had a strong 2017, and in particular the US markets as the long-awaited tax reform proposed by President Trump was passed just in time for Christmas. American politics will stay in focus this month as the issues of the debt ceiling will crop up again as a short-term fix was reached last month. Given how tensions surrounding North Korea and political uncertainty in relation to President Trump failed to derail the rally last year, it is unlikely the debt ceiling will cause any major issues for the bulls.
The FTSE 100 played catch up with the US indices as the British market soared to fresh record-highs last week underpinned by the rally in mining companies. The London equity benchmark has a relatively high exposure to commodity related companies and when copper hit a three and a half year high last week, it dove the mining stocks higher too. Overnight the Caixin survey of Chinese manufacturing for December came in at 51.5, while traders were expecting a reading of 50.7, and the November reading was 50.8.
Later today we are expect a raft of manufacturing reports from Germany, France, the UK and the US. The reports from Germany and France will be of particular importance as recently their manufacturing sectors have been running at levels not seen for several years.
The highlight of this week will be the US non-farm payroll report on Friday, and the consensus is for 187,000 jobs to have been added in December, and that would be a decline on November’s reading of 228,000. The unemployment rate is tipped to hold steady at 4.1%. Economists are anticipating the average earnings figure on a yearly basis to remain at 2.5%. Some US companies like Comcast, Wells Fargo (NYSE:WFC) and Boeing (NYSE:BA) have pledged to increase employee wages in the wake of the tax reform. Wage growth in the US hasn’t been to impressive for many months now, and economists would like it to tick up as it would be required to keep the economy moving in th right direction.
EUR/USD – has been edging higher since early-November and if it holds above the 1.2000 mark, it could target 1.2092. Support could be found at the 1.1900 area or at 1.1814 – the 100-day moving average.
GBP/USD – has been pushing higher since March and is above the trend line support which comes into play in the 1.3340 region. Rallies could encounter resistance at 1.3600 or 1.3659. A move below 1.3340 may send the market to 1.3200.
EUR/GBP – has been edging higher since early December, and it has managed to move above the 50-day moving average at 0.8855. If it can hold above 0.8855, it could target the 100-day moving average ay 0.8929. A break below 0.8855 could see it retest 0.8800.
USD/JPY – has dipped below the 50-day moving average at 112.97, and if it remains below that metric it could target the 112.00 region, a break below 112.00 could find support in the 111.00 region. Rallies may encounter resistance at 113.75
FTSE 100 is expected to open 10 points higher at 7697.
DAX is expected to open 17 points lower at 12900.
CAC 40 is expected to open 5 points lower at 5307.
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