Focus Turning to US NFP, Strong Number Anticipated?

The record ADP number from US yesterday was overshadowed by intensifying worry on the never-ending European debt crisis. The anticipated risk rally didn't happen even though DOW, FTSE and DAX managed to close nearly flat. Asian markets are mostly down with Nikkei losing over -110 pts and put most currencies under renewed pressure against dollar. Investors will turn their focus to today's Non-farm payroll report for inspirations. But the tug-of-war between US recovery and European debt will continue and offset each others' impact on markets.

Regarding the non-farm payroll report today, markets are expecting 150k job growth in December with unemployment rate back up from 8.6% to 8.7%. Most of the leading indicator to NFP are positive. That includes yesterday's record ADP job growth of 325k. Four weeks moving average of initial claims dropped further to 370.8k. The employment component of ISM manufacturing jumped sharply from 51.8 to 55.1 in December. Even though the employment component of ISM services stayed below 50, it did improved from 48.9 to 49.4 in December. So, we'd very likely get an upside surprise in NFP headline figure today.



The NFP figured deteriorated sharply to a total of 290k in Q2, then recovered to 441k in Q3. So far, the combined number of October and November is 220k. So, any number above 221k in December should mark improvement in Q4 over Q3 and would be quite positive. And, judging from yesterday's actions in financial markets, traders had much reservation so far as some said that the ADP number was just too good to be true. Hence, there is indeed much room for risk rally if we do get a strong NFP number today.



Other than NFP, there are also a lot of important data to be released today. Swiss CPI is expected to show deeper deflation of -0.6% yoy in December. So far, SNB has refrained from raising EUR/CHF floor, nor implement negative interest rates. EUR/CHF is currently quite close to 1.21 support and deeper deflation reading would possibly trigger a rebound in the cross. Eurozone confidence indicators, retail sales, unemployment rate and German factory orders would be released but impact would be muted. Canada will also release job data which is expected to show 14.3k expansion in the employment market, with unemployment rate unchanged at 7.4% in December.