January 4, 2003	Saturday	Shawwal 30, 1423

LONDON, Jan 3: The US December employment report is expected to dominate financial markets’ attention next week, while UK and euro-zone central bank policy meetings should be non-events, according to analysts.

The US December non-farm payrolls report is released next Friday and is likely to overshadow other scheduled data and events. A Reuters poll of economists forecasts an increase of 20,000 workers in December after a 40,000 fall in November. That would leave the unemployment rate in December unchanged at six per cent.

“The coming Friday’s release of the payroll data will be the key determinant of market sentiment in the near term,” said Steve Barrow, foreign exchange strategist at Bear Stearns in London.

He said the expectation was that US payrolls will be stronger than the previous month. This may help ease the current negative sentiment in the bond markets.

Meanwhile, some analysts have even suggested that given the sharp jump higher in December’s manufacturing sector purchasing management data — compiled by the Institute for Supply Management (ISM) — the payroll figures could well be stronger than the consensus forecast.

“We expect the figures to rise by 75,000 in the light of recent data but overall the jobless rate is still likely to be flat in percentage terms,” said Andrew Bevan, senior bond economist at Goldman Sachs in London.

“It’s possible we get yet stronger payrolls data based on the ISM survey, as anything is possible,” said Alan Wilde, director of fixed income at Abbey National Asset Managers in Glasgow.

But Cyril Beuzit, head of interest rate strategy at BNP Paribas in London, said that the strong ISM manufacturing data this week will need further supporting evidence given that recent consumer confidence and retail sales numbers were weak.

“Nevertheless, the ISM manufacturing numbers do reinforce the feeling that the US economy is bottoming out,” he added.

The week will begin with December services sector purchasing management data in both the euro zone and the US on Monday.

A Reuters poll forecasts the euro zone December purchasing management index (PMI) to be barely expanding, at 50.9, up from 50.8 in November.

However, the market will be disrupted by thin trading volumes with many bond markets closed in the euro zone for a public holiday on Monday. They include Austria, Finland, Greece, Spain, Sweden, and parts of Germany. Italy will not conduct any after-hours trading.

The US December non-manufacturing PMI is forecast to slip to 56.1 from 57.4 in November.

“However, the US manufacturing and non-manufacturing parts are really part of a dual economy, so we still expect a slightly weaker non-manufacturing number in the US,” said Abbey National’s Wilde.

The European Central Bank and Bank of England both conclude monetary policy meetings on Thursday, but analysts said they expect no change in interest rates in the coming week.

The ECB will follow up its decision on rates with a press conference. The ECB cut interest rates by half a point to 2.75 per cent in December.—Reuters