Daily Market Report - 04/12/2014

Weak service sector surveys in the Eurozone fuelled speculation the European Central Bank will sanction more measures to stimulate the economy when it meets on Thursday. Figures from Germany showed the private sector grew at the slowest pace in 17 months in November. Markit’s final composite PMI, which covers the manufacturing and service sectors, fell to 51.7 from 53.9 in October. 

In France business activity across manufacturing and services declined at the fastest rate in nine months in November, primarily brought down by weak services. Markit’s composite PMI fell to 47.9 from October’s 48.2, below the 50 mark that separates expansion from contraction. 

Figures from Italy showed services firms recorded an increase in business activity for the second month running in November but short term, it still looks bleak overall. The reading for Italy's activity index came in at 51.8 from 50.8.

We also had Eurozone retail sales figures which returned back to growth in October but fell short of what was anticipated. After a weak Q3, sales rose 0.4% month on month for a 1.4% year on year gain. This follows a fall of 1.2% month on month in September but was below expectations of 0.6% growth. The main factors for the growth in the retail sales sector were the sale of non-food products and fuel at petrol stations.

Yesterday in the UK we had the autumn statement from Chancellor of the Exchequer George Osborne .  Economic growth has outperformed the March forecast giving the UK the fastest growth rate in the G7. They estimate that the economy grew by over 3% over the whole of 2014, up from its March forecast of 2.7%. Growth for 2015 has also been revised up to 2.4% from 2.3%.

Unemployment is currently at 6% and is expected to continue to fall but at a slower rate, it is expected to drop to 5.4% in 2015 and 5.2% in 2016. Inflation in 2015 is forecast to be 1.2%, down from the previous prediction of 1.5%.

Apart from the autumn statement, we had the service figures which showed the sector saw better than expected growth last month. The PMI headline index rose to 58.6 from 56.2 in October which shows a fast level of expansion and the level is much higher than the historical average. Economists were only expecting a small rise to 56.5.

The latest ADP report on private payrolls came out yesterday ahead of the non farm payroll data on Friday.
The figure showed the ADP payroll had increased to 233,000 from 230,000. With this said, the ADP national employment report did show that Us employment had increased by 208,000 private sector jobs in November.

Also in the US, the Markit services sector PMI fell to 56.2 in November from 57.1 in October, and slightly less than an initial estimate earlier in the month of 56.3. This showed that growth was at its lowest level since April.

The key news out today is the ECB interest rate decision that is expected to remain unchanged at 0.15%, however there is strong speculation Mario Draghi will introduce quantitative easing  into the Eurozone. If these stimulus measures are introduced we expect to see the Euro currency weaken off. 


Key Announcements:

12:00- GBP: Bank of England interest rate decision. Expected to remain at 0.5%.
12:45- EUR: ECB interest rate decision expected to remain unchanged at 0.5%
13:30- EUR: ECB press conference.
13:30- USD: Initial Jobless claims expected to be lower to 290K from 313K 

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