The first regular trading week of the new year has been a tough one so far. In addition to new inflation data in Germany, it was robust economic data in the USA that increasingly drove investors. The official US labor market report awaits market participants at the end of the week. US President-elect Donald Trump is also likely to increasingly become a topic of conversation.
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German inflation rises more strongly than expected - ISM index and "JOLTs" put investors off
Investors had to digest new inflation rates for the Federal Republic of Germany at the start of the week. According to preliminary estimates, inflation in January 2025 is likely to be 2.6% compared to the same month last year, which is significantly higher than expected (2.4%), after a total of 2.2% in the previous month.
The ISM Purchasing Managers' Survey for the services sector was significantly stronger than expected on Tuesday (54.1 points), after 53.3 points had been forecast in advance. The threshold of 50 points acts as a growth threshold.
At 8.098 million units, the so-called "JOLTs", which reflect the vacancies on the labor market, were also significantly better than expected (7.7 million).
German retail trade better than expected - ADP data and Fed minutes move the needle
Retail sales in Germany provided a small ray of hope in the middle of the week. Compared to the previous month, sales fell by just 0.60%, after an increase of 0.50% had been expected in advance.
The ADP data signaled a narrow downturn with 122,000 units, after 146,000 jobs in the previous month. Expectations were for 140,000 new jobs. These figures may provide an important foretaste of today's publication of the Non-Farm Payrolls (NFPs).
US President-elect Donald Trump also caused a stir on Wednesday after he put a damper on sentiment on the trading markets with renewed tariff threats. If the planned import tariffs fuel inflation, this could tend to dampen interest rate cut fantasies.
Meanwhile, the Fed minutes published late on Wednesday evening provided food for thought, even if they did not bring any major surprises.
"Participants expected inflation to move further towards two percent, although they noted that recent higher-than-expected inflation readings and the impact of possible changes in trade and immigration policies suggested that this process could take longer than previously thought," it said.
There was no trading in the USA on Thursday due to the funeral service for former US President Jimmy Carter.
In Germany, retail sales for the eurozone showed a small increase of 0.1% compared to the previous month.
German industrial production also increased surprisingly significantly compared to the previous month (1.50%), following a decline (-1.00%) in the previous month.
US labor market data as weekly highlight - economists expect the job market to deteriorate
Today, Friday, the focus will be on the publication of US labor market data (non-farm payrolls), which should provide important impetus.
Economists expect an increase in non-farm payrolls of 160,000 units, following a total of 227,000 units in the previous month. However, the unemployment rate is not expected to change compared to the previous month (4.2%).
Consumer confidence (Reuters/Uni Michigan) at 16:00 should also provide impetus.
