The Week Ahead For Global Markets

This week, the core ‘look ahead’ framework is to confirm U.S. macroeconomic strength and non-U.S. macroeconomic weakness. Fresh data that surprise this macro ‘divergence’ consensus moves risk markets sharply.

With a New Year’s 2015 Holiday falling on Thursday this year, the week ahead for global markets doesn’t get interesting until Friday. On Friday --once 2014 trading is fully behind us -- global markets will trade heavily on the arrival of a huge batch of Purchasing Manager Index (PMI) numbers.  PMIs serve as critical leading indicators for a host of countries.

On Tuesday, the U.K. offers risk markets data on its nationwide house price index. Under not-seasonally-adjusted terms, the y/y rise has been +8.5%. This month may show a seasonally adjusted m/m rise of just 0.2%. That amounts to U.K. house price cooling. On this side of the pond, the S&P Case Shiller Home Price index looks for a +4.5% y/y U.S. house price rise.  

A U.S. consumer confidence index hits too. Look for a 94 reading there. Italy’s ISAE business sentiment index also comes out. A prior reading of 96.3 is looks to rise to 96.7 this time around.

On Wednesday, U.S. initial claims arrive a day early this week. Look for a 287K reading there. That’s a bull market number. The Chicago PMI will also arrive. A 60 number is forecast there—another bull market number. That mean more U.S. strength is in the cards for early 2015. U.S. pending home sales will look for a +0.5% bounce this month, recovering from last month’s -1.1% decline.

Thursday is the New Year's Day holiday.

On Friday, there will PMI readings galore. First off, there will be a PMI reading out for HSBC Markit China Manufacturing (a 49.5 expectation). Then, a host of European country manufacturing PMI readings hit, with Italy (a 49.5 expectation), France (a 47.8 expectation) and Germany (a 51.2 expectation) looking the most important.  

Acting in stark macro contrast, the Markit U.S. manufacturing PMI (a 54 expectation) should trump any PMI seen in Europe or Asia. The ISM U.S. manufacturing PMI (a 57.5 expectation) could be even higher. 

Finally, riding on U.S. coattails, the HSBC Mexico manufacturing PMI (a 53.5 expectation) comes out. There is an IMEF Mexico manufacturing (a 53.5 expectation) and non-manufacturing (a 52 expectation) index out too. These Mexico PMIs should show U.S. manufacturing strength spilling over to Mexico.

In short, look out for PMIs. That’s the most important indicator to key on.