Investing.com -- Wall Street is seen trading marginally higher Monday as investors await the release of key employment data later this week. Inflation numbers in Europe will also be in focus, as well as political turmoil in Canada.
1. Payrolls loom large
This week’s major focus will be the monthly US employment report, which is expected to show on Friday that the world’s largest economy added 154,000 jobs in December, while the unemployment rate is expected to hold steady at 4.2%.
Labor market data has been volatile in recent months amid disruptions from strikes and hurricanes. November data showed growth of 227,000 jobs, rebounding from a tepid rise in October.
Investors will be hoping that the jobs report points towards solid economic growth, but not so strong that it makes it even harder for the Fed to keep cutting rates.
A rise of around 150,000 would bring 2024 job creation to 2.134 million, which would be the lowest annual total, outside of a COVID-driven loss in 2020, since 2019's 1.988 million.
The Federal Reserve projected only two more rate cuts this year at its last policy-setting meeting, a substantial reduction for the four cuts seen in September, and the week’s numerous Fed speakers are likely to sound cautious about cutting rates much further.
2. Futures just higher; employment data seen key
US stock futures were marginally higher Monday, with traders reluctant to take major positions ahead of the release of widely-watched economic data in another shortened trading week.
By 03:55 ET (08:55 GMT), the Dow futures contract was up 35 points, or 0.1%, S&P 500 futures climbed 17 points, or 0.3%, and Nasdaq 100 futures rose by 97 points, or 0.5%.
The major averages came off a losing week, amid concerns over the extent of future interest rate cuts by the Federal Reserve after the relatively hawkish comments that accompanied last month’s reduction.
The New York Stock Exchange will also be closed Thursday to mourn the death of former President Jimmy Carter.
Traders will be looking for clues about the strength of the economy, and thus the likely Fed moves, with the highly-influential monthly jobs report due out Friday.
Investors are also watching the Job Openings and Labor Turnover Survey on Tuesday and Wednesday’s ADP Employment Survey, ahead of the Fed meeting at the end of this month.
3. Eurozone CPI to guide rate cut expectations
German consumer prices for December are due later in the session, ahead of Tuesday's flash eurozone inflation data, and are expected to show that inflationary pressures remain subdued in the euro bloc.
That said, Spain has already released its numbers for December, and its above-expectations print on the back of energy prices could be replicated elsewhere.
Investors are looking for the European Central Bank to ease interest rates by 100 bps in the first half of 2025, and any signs that inflation is easing further would give the ECB scope to loosen policy and support a struggling economy.
But a colder winter could complicate matters, particularly with natural gas prices at elevated levels, and given the end of a decades-long deal for Russia to supply gas to Europe via Ukraine.
4. Trudeau to resign as Canada’s PM?
Justin Trudeau’s time as Canada’s Prime Minister looks to be running out, after a number of reports indicated he is set to step down as leader of the country's ruling Liberal Party after nine years in office, potentially as early as Monday.
If he does resign, it would likely spur fresh calls for a quick election to put in place a stable government to deal with the new Donald Trump-led administration across the border, which has already threatened substantial trade tariffs.
Recent polls suggest the Liberals will badly lose to the official opposition Conservatives in an election that must be held by late October.
The Canadian dollar rose against its US counterpart, with investors welcoming the chance of an early election to clarify the outlook, although gains were muted suggesting the news had been somewhat priced in.
At 03:55 ET, USD/CAD fell 0.6% to 1.4365.
5. Oil slips slightly ahead of key data
Crude prices edged lower Monday, weighed by a strong dollar, but losses are minor as traders await the release of key US economic data later in the week.
By 03:55 ET, the US crude futures (WTI) dropped 0.4% to $73.66 a barrel, while the Brent contract fell 0.4% to $76.20 a barrel.
Crude prices reported two straight weeks of gains on hopes of improving demand in China, especially as Beijing prepares to unlock more stimulus measures in the coming months.
Colder weather in the US and Europe is also expected to help boost oil demand, especially for distillates.
But strength in the dollar has prompted some profit-taking Monday, as the greenback stayed close to two-year highs before a string of key economic readings this week which will provide clues as to the strength of the US economy, the largest consumer of energy in the world.
Traders are also watching for any supply disruptions, with the Biden administration reportedly planning to impose more sanctions on Russia over its war on Ukraine.