Daily Market Report - 07/01/2016

U.S. companies added a significant number of workers December, pointing to underlying strength in the economy despite signs that growth slowed sharply in the fourth quarter.  ADP said private-sector employment rose by 257,000 last month, the largest gain since December 2014, after increasing by 211,000 in November.  On the back of this  figure economists expect to see a 200,000 increase in non – Farm payrolls, which is a slight reduction in Novembers figure of 211,000.

According to Markit US services grew more strongly than expected in December, but were still at their lowest level since January last year. Its services PMI came in at 54.3 compared to expectations of 54 and an initial reading of 53.7. However, it was weaker than the November figure of 56.1. The data suggests that the US Service sector ended the year on a weaker footing, with business activity and incoming new work both expanding at lower rates than November.

The ISM non-manufacturing report also suggests some weakness in the US economy. PMI came in at 55.3 in December, down from 55.9 in November and lower than the 56 that analysts had been expecting. This was the lowest reading since April 2014.

Growth across the UK’s service sector dipped last month, suggesting the British economy isn’t growing as fast as hoped. Markit’s UK Services PMI dropped to 55.5 in December, from 55.9 in November. This still shows robust expansion with firms taking on more business but the Markit report said growth in recent months has been slower than in the first half of 2015.

Growth in Europe is picking up. The composite PMI, which measures manufacturing and service growth across the Eurozone hit a 4 and a half year high, up to 54.3 from 54.2. Ireland posted the fastest growth, continuing a strong run. More surprisingly, Italy was the second-best performer, ahead of Germany, whilst France continues to slide.

Oil prices fell below $35 per barrel for the first time since 2004 on Wednesday, tumbling more than 5 percent as the row between Saudi Arabia and Iran made any cooperation between major exporters on cutting output even more unlikely. The international furor over Saudi Arabia's execution of a Shi'ite cleric ended speculation that OPEC members might agree to production cuts to lift prices.

Adding to this oversupply, Iranian oil exports are widely expected to increase in 2016 as Western sanctions against Tehran are lifted.

Key Announcements 
10:00 – EUR – Unemployment Rate expected to stay the same at 10.7%
13:30 – USD – Continuing Jobless Claims expected to fall to 2.193M from 2.198M
13:30 – USD – Initial Jobless Claims expected to fall to 275k from 287k