— This is the script of CNBC's news report for China's CCTV on January 6, Monday.
Hello and welcome to the CNBC Business Daily.
I'm Li Sixuan at the Singapore Exchange. After two lacklustre trading sessions, markets may finally get some trading direction from this week's central bank meetings and the release of key economic data. The standout event would be the ECB's policy review on Thursday, with the central bank not expected to change its monetary policy unchanged. Inflation continues to run well below the ECB's two percent target, but relatively steady employment and retail sales data could bolster views that the euro zone may return to growth in 2014 after two years of contraction.
So how should you position yourself in the euro? here's what an expert has to say:
[Soundbyte on tape by Jonathan Cavenagh, Senior FX Strategist, Westpac Institutional Bank] We're still looking for the euro to correct lower through the course of 2014. We don't think the growth rebound is sustainable. The banking system is still contracting in terms of its lending to the rest of the economy, and we think that's going to be a significant headwind to both European growth and ultimately the European currency as we progress through 2014.
China consumer and producer inflation data also in focus on Thursday. Beijing has been largely successful in taming the CPI as authorities work to slow economic growth to a more sustainable footing. This as the PPI fell for 21 straight months. But the government's pledge to let market forces have a bigger say in the economy would lead to upward pressure on prices. Our next expert said there could be more challenges further down the road:
[Soundbyte on tape by James Gruber, Author, Asia Confidential] The stock market in Shanghai has factored in a lot. It's more than 60% down from 2007 peaks so much of the stock market's been pricing in that China's economy is in trouble and has been for some time and people haven't been paying enough attention frankly at the stock market they've been looking at the GDP numbers rather than stock markets telling them that something's not right here. So does it go down further from here? I think so.
And the all-important nonfarm payrolls data on Friday could determine whether the Federal Reserve's surprise decision to cut its bond buying plan to $75 billion a month was timely or premature. Analysts expect an addition of 197,000 jobs in December, a tad weaker than the previous month. The US jobless rate seen steady at seven percent.
Recent economic data have suggested that the US is on a firmer footing, but some detractors say the Fed may have been too hasty.Here's what some of our guests think:
[Soundbyte on tape by Paul Bloxham, Chief Economist for Australia and New Zealand, HSBC] Payrolls of course, at the end of the week. We think those numbers are going to be solid enough to see the Fed on a path to tapering or reducing the quantitative easing program as the year goes on. We think rate hikes are still a long way off for the US. We think that tapering is going to continue – probably about $10 billion a month or each meeting – and finishing up by the tail end of this year. 061326 In large part because the Fed, even though they want to keep monetary policy stimulatory and interest rates low, they've got other concerns. 061332 They've got concerns that they don't want to keep building up their asset holdings, they don't want to keep expanding their balance sheet. 061343 It's other reasons that are also driving the Fed to continue that tapering program as you look through 2014.
[Soundbyte on tape by Glenn Macguire, Chief Economist, Asia Pacific, ANZ] When you look at the US, it's still recovering from a state of very deep financial crisis. There is a degree of pent up demand in the economy, we still have very stimulatory settings in monetary policy, if you look at the factory output surveys in the US, they remain extremely elevated. The US is clearly leading the way. US factories aren't just producing these goods for inventories, there is organic demand in the US. Obviously the Fed is tapering its unconventional monetary policy, and that in itself is a signal that the US economy is perhaps strong enough to withstand tapering.
Li Sixuan from CNBC's Singapore headquarters.
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