Five things to know before the market trades this week, Feb 2-8

Yanis Varoufakis, Greece's incoming finance minister, pauses during the handover ceremony in Athens, Greece, on Wednesday, Jan 28, 2015. -- PHOTO: BLOOMBERG
Yanis Varoufakis, Greece's incoming finance minister, pauses during the handover ceremony in Athens, Greece, on Wednesday, Jan 28, 2015. -- PHOTO: BLOOMBERG

1. It's all Greek this week

Prime Minister Alexis Tsipras and his Finance Minister Yanis Varoufakis will be using up their frequent flier miles this week as they travel to Rome, London, Paris - and possibly Munich - to drum up support from fellow European leaders for an new anti-austerity deal with Greece's creditors.

It may be all in vain. Germany's Angela Merkel has already said "Nien" to cancelling any more of Greece's 240 billion euros worth of debt extended by the troika - the European Commission, European Central Bank and the Inyernational Monetary Fund.

The danger for Tsipras, who won power in a Jan. 25 election, is that unless a deal is reached, both the country's banks and the government could run out of cash next month. Ending the bailout programme could see Greek banks effectively excluded from ECB liquidity operations while the government is still shut out of international markets.

2. US jobs data to test for "solid"

The Federal Reserve's upgraded view that growth in the world's biggest economy is "solid", and so capable of withstanding an interest rate rise this year, will be put to the test by U.S. jobs data this week, says Reuters.

A Reuters poll forecasts that payroll data out Friday will show about 230,000 jobs were created in January, slowing slightly from 252,000 in December but still robust and a 12th consecutive month of payroll increases above 200,000, the longest such stretch since a 13-month run in 1994-95.

But look at figures for wages. Weak wage growth so far has dented some of the optimism created by strong job creation. Average wages fell 0.2 per cent in December, the biggest decline in at least eight years, although some economists said that may have been a seasonal fluke, and the consensus is for a 0.3 per cent increase in January, Reuters said.

Why do we care so much about the jobs data? It's one of the data that determines when the Fed will feel safe raising its key interest rate which has been close to zero since 2008. Fed officials have indicated that interest rates could rise as soon as in June, though investors are pencilling in a move in September.

Friday's figures look all the more crucial given the mixed picture from last week. The US central bank lifted its assessment of the US economic recovery to "solid" from "moderate", with jobs growth now seen as "strong". But data out on Friday showed US economic growth slowed sharply in the last quarter of 2014 to 2.6 per cent from the previous quarter's 5 per cent. Institute for Supply Management reports on Monday and Wednesday and consumer spending data on Monday will provide more clarity.

3. China woes

China's factory sector unexpectedly shrank for the first time in nearly 2-1/2 years in January and firms see more gloom ahead, an official survey showed on Sunday, raising calls and expectations that Beijing will take more action to forestall a sharper slowdown.

The slowdown has also broadened into China'ss burgeoning services sector. A separate official services PMI, also released on Sunday, showed growth in the sector cooled to a one-year low in January.

The disappointing official data showed the world's second largest economy was still struggling to gain traction after expanding at its slowest pace in 24 years in 2014.

4. Oil on a roller coaster ride

Oil prices bounced more than 8 per cent from six-year lows on Friday on a sharp drop in U.S. drilling but more bad news could see them fall back just as quickly.

There's gloomy China data and also big energy companies like Exxon Mobil reporting their fourth-quarter results this week.

5. More central bank rate decisions this week

Traders are betting the Reserve Bank of Australia (RBA) will cut interest rates on Tuesday to stimulate an economy ravaged by the commodities slump, sending the Aussie dollar falling further.

Australia is struggling with the end of a once-in-a-century resources boom and a slowdown in China, which buys more than a third of its exports. RBA Governor Glenn Stevens has been trying to talk down the Aussie for months to make the economy more competitive.

Switzerland, Singapore, Denmark: There seems to be a global trend of competitive currency devaluations that has pundits talking about a currency war.

The UK and India are also among other countries making interest rate decisions this week.

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