European Markets focus on PMI and FOMC Data

European markets are trading higher ahead of the important economic data release. Today is the day when we will have the services PMI data for Italy, Spain, France and Germany. Higher oil prices should have its rubber stamp on these numbers however, we may just have to wait for a little bit longer to see more significant impact on this data. The FTSE 100 is building on its gains and could set another record high.

Santa was not so generous for the UK’s retailer NEXT which posted another warning for a tough year ahead. The winter season was difficult for the firm and the full year profit guidance has come under pressure as a result of this. NEXT is considered as the bellwether for the UK’s high street and the firm has said that 2017 could be a tricky year and rising inflation could make consumers to curb their spending. This is not the kind of music you want to hear if you are the shareholder of the firm.

Nonetheless, today, investors will be looking to see if the FOMC minutes can give some clues about the central bank's position in relation to the upcoming promised fiscal spending by Donald Trump. On the back of these minutes, they will certainly adjust their positions.

The Fed has shown their hawkish hand during their meeting in December when they indicated that there could be three interest rate hikes this year. The dollar rallied on the back of this news and investors have anchored their expectations accordingly. Today's minutes will be more important if they give a clue as to how the central bank is planning is to work with the newly elected president.

The Fed will have to look at all angles when it comes to monetary policy decisions. Given that it is not long until Donald Trump becomes the president of the US, this will be an opportunity for investors to learn about the Fed's plan to tackle the upcoming tax cuts and fiscal spending which the president-elect has announced.

What is also important is the Fed's view on inflation, especially after the ISM manufacturing survey data released yesterday which has shown a much stronger reading. Even the oil price has improved further. Improvement in input prices is going to have an impact on the final products which would, in turn, move the scale on the inflation number, upon which the Fed can no longer be reticent.

Ahead of taking office, Donald Trump is on a roll when it comes to his Tweeting prowess. He has shown that he favours products which have been made in America and he seems adamant that the firms exporting into the US should be in a position to a pay heavy border tax. Ford motors has abandoned its plan to open its new plant in Mexico and this shows that firms have already started to respond. This may be just an early sign and others may just follow in the coming days. Firms like Apple, will be under big pressure to bring jobs back home.

Over in Asia, we had an important economic number released overnight. The Japanese manufacturing Purchasing Manger Index printer was much better than the forecast, confirming a better economic picture. The Japanese yen is weaker as the dollar has grown stronger and this has helped the Nikkei index to log some gains.

As for black gold, it has recovered its lost ground. The dollar strength, along with Ford's plan to not to build its new plant, has had an impact on the price of oil. Investors were initially apprehensive about whether or not Donald Trump's strategies would dent the oil demand as the transport sector would be adversely impacted. However, the OPEC supply cut has gained more attention from investors. The crude inventory data which is due later is also important and it could move the price of oil higher if inventory build-up is lower than the expectations.

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