Keeping watch for signs of a strengthening global recovery

Two themes will dominate market thinking in 2014; to what extent the data shows a strengthening global recovery, and the reaction of central bankers in the leading economies in easing or maintaining stimulus measures, with the increasing possibility of interest rate rises in the latter part of the year if the recovery accelerates.

In this vein the highlights in the first full week of the year will be Friday's release of US labour market data and Thursday's meetings of the European Central Bank and the Bank of England.

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The US employment situation report is expected to show another healthy rise in employment in December, with non-farm payrolls up by 193,000, slightly less than the 203,000 recorded in November. The unemployment rate is expected to remain unchanged, at 7.0 percent.

After the monthly non-farm payrolls numbers, the most closely watched US indicator is probably the Institute for Supply Management's non-manufacturing survey, covering activity in the dominant services sector as well as mining and construction. The December index is released on Monday and is expected to tick up slightly from 53.9 in November, indicating unspectacular yet steady growth.

In the eurozone, December inflation numbers for Germany are published on Monday, and for the single currency area as a whole on Tuesday. Both releases are expected to show the deflationary fears that prompted a surprise cut in interest rates by the ECB in November receding. The ECB will have a chance to explain its latest thinking on inflation and growth after its monthly meeting on Thursday. The US Federal Reserve decision to begin tapering its asset purchase programme prompted a rise in the euro against the dollar which will be of concern to the ECB if continued.

Eurozone unemployment data may also be of interest. Data are published for Germany on Tuesday, and for the entire eurozone on Wednesday. The data are likely to show a sharp divergence between the member states, with unemployment stable in Germany, rising in France, Spain and Italy and falling in Ireland and Portugal.

In the UK two significant data releases are expected to indicate accelerating growth in the final quarter of 2013. On Monday the services purchasing managers' index for December from CIPS and Markit is likely to have risen slightly from November's reading of 60.0, consistent with above-trend growth, while on Friday, analysts expect manufacturing output to have risen 0.4 per cent in November, following solid survey data, raising the annual rate of growth to 3.3 per cent, from 2.7 per cent in October.

The Bank of England's meeting on Thursday is likely to be uneventful, following the pattern of meetings in the latter part of last year, but with unemployment falling rapidly towards the BoE's threshold of 7 per cent - initially expected in 2016, but now likely in the first half of 2014 - market expectations of interest rate rises during the year will have to be addressed by the BoE.

Two further indicators in the UK may be of interest - any pick-up in exports in Thursday's trade data for November will be seized on by the government as evidence of economic rebalancing, while the Halifax house price index, published during the week, is expected to show annual house price inflation rise above 8 per cent, raising fears of a housing market "bubble".