Daily Market Report – 07/01/2015

EUR
The euro zone economy ended 2014 with its worst quarter for over a year,
December Services PMI data falling again to 51.6.continuing downturns in France
and Italy and a stuttering performance by Germany has hampered growth. Britain
experienced a similarly gloomy end to the year, with growth across services
companies weakening to its slowest since mid-2013. That underscored a wider
loss of pace in the economy as an election approaches.

EUR
The euro zone economy ended 2014 with its worst quarter for over a year,
December Services PMI data falling again to 51.6.continuing downturns in France
and Italy and a stuttering performance by Germany has hampered growth. Britain
experienced a similarly gloomy end to the year, with growth across services
companies weakening to its slowest since mid-2013. That underscored a wider
loss of pace in the economy as an election approaches.

Italy’s service sector shrank for the first time in three months in December
while overall business activity in France also contracted PMI
figures showed. With fears cheap oil will tip the now-19-country bloc into
deflation prompting calls for urgent action by the European Central Bank to
stimulate prices in the economy.

GBP
Growth at U.K. service companies slowed more than economists forecast in
December, adding to signs the economy lost momentum at the end of 2014. The
Markit Purchasing Managers’ (PMI) Index fell to 55.8 from 58.6 in November.
That’s the lowest since May 2013 and compared with the median estimate of
economists for 58.5. While the measure of new business declined to a 20-month
low, the growth remained well above trend according to the Markit Survey. It
also said that companies’ cost pressures remain muted by historical standards.

The loss of momentum in the UK economy toward the year end will no doubt fuel
worries that the economic upturn is too fragile to withstand higher interest
rates. Coupled a with lower inflation rates due to record low oil prices suggests
it is currently unlikely interest rates will be hiked in 2015. 

USD
In the US Markit reported yesterday that the US service sector PMI fell to a
10-month low last month, dropping to 53.3 in December. That still shows growth,
but much more modest than in November. Businesses reported that new business,
and output, both grew at a slower rate as 2014 ground to a halt.

Key
Announcements:

10:00 – EUR: Euro zone Core CPI (Dec) YOY
expected to fall from 0.7% to 0.6%
10:00 – EUR: Euro
zone unemployment rate (Dec) expected to be unchanged at 11.5% 
13:15 – USD: US
ADP unemployment change (Dec) expected to improve from 208K to 225K
13:30 – USD: US Trade Balance (Nov) expected to
improve from -43.4B to -42B

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