“This week will go a long way to determining whether the uncertainty hanging over the world economy and markets fades after a rocky January or lasts further into the year.
A raft of global business surveys, jobs data from the United States and central bank meetings in Europe should offer a clearer view on how well the global economy is faring at the start of 2014.
Most economists have been expecting a better 12 months after three years of slowing global growth, but the recent turmoil in emerging markets has given them pause for thought.
MSCI’s global index posted its largest monthly decline since May 2012 in January, sliding 4 percent.
Emerging markets were down 6.6 percent for the month — their worst January since 2009 — after another turbulent day on Friday, when the Russian ruble slid and bond yields rose sharply across the board.
“Markets in the major economies will continue to be subject to trends in emerging markets (this) week, both in terms of overall currency and stock market sentiment,” said Philip Shaw, chief economist at Investec.
First up are purchasing managers’ indexes (PMIs), which survey thousands of businesses worldwide. While the PMIs from Europe and the United States are expected to show more growth, particular attention will be paid to those from China.
“There are potential flashpoints in the form of various Chinese PMI indices – signs of a slowdown in the pace of economic activity in China would result in the risk-off lights starting to flash again.”
The other key data will be Friday’s jobs report from the United States.
The world’s No.1 economy added the fewest workers in nearly three years in December – just 74,000 non-farm jobs – although the consensus of economists polled by Reuters points to a rebound in January.
Still, there could be potential for another nasty surprise.
“As if forecasting the monthly change in non-farm payrolls were not hard enough, the outlook for January payrolls is clouded by poor weather, difficult seasonal adjustment, annual benchmark revisions, and methodology changes,” said Scott Brown, chief economist at Raymond James in St. Petersburg, Florida.
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