Financial markets are preparing themselves for a wealth of economic data this week with central bank interest rate cuts and employment data in focus.

This Week
With high volatility events expected everyday this week there will be no shortage of market action. We start on Monday with the UK’s Manufacturing PMI. The index is firmly set in a state of contraction with a reading of 41.5 for October likely to worsen to 39.8 in November.

At 13:30 Canadian monthly GDP will be released. This release will reference the month of September with 0.2% monthly growth expected after a 0.3% contraction in August.

Manufacturing data is also due from the US on Monday with the release of the ISM Manufacturing PMI. Similarly to the UK, US manufacturing is in a period of contraction. The reading for November is expected to come in at 37.2, worse than the 38.9 seen in October.

Ben Bernanke will speak at the Greater Austin Chamber of Commerce on Monday with his speech expected to draw heavy interest and subsequent volatility. He will be the keynote speaker at the Annual Economic Forecast event organised by the Austin Chamber.

On Tuesday we will see high volatility concentrated in the overnight session with key data due from Australia. At 00:30 UK time the Retail Sales Trend figure for October is to be released. Economists are expecting 0.1% MoM growth after Septembers 0.2% increase.

We will be staying in Australia for the week’s first central bank interest rate announcement. The RBA Interest Rate Statement is expected to confirm expectations of a 0.75% cut in the Cash Rate from 5.25% to 4.50%.

On Wednesday we will see more high volatility from Australia with the quarterly GDP release. Data for the third quarter is expected to show a 0.2% growth in GDP after the 0.3% reported in Q2.

At 09:30 we will see information from another of the UK’s key industry sectors. The Services PMI for November is likely to have deteriorated to 41.2 from 42.4 in October.

This week’s key North American events are undoubtedly the employment data releases. The first of which comes from the US on Wednesday in the shape of ADP Non-Farm Employment Change. Traders are using this number as a guide to official Non-Farm Payrolls due later in the week so high volatility can be anticipated. It is expected that the US economy lost 200K jobs in November after losing 157K in October, according to ADP.

Next up for the US will be the ISM Non-Manufacturing PMI at 15:00. Like its manufacturing counterpart the index is inside the contraction zone with a reading of 42.5 expected after October’s 44.4.

Wednesday will play host to more monetary policy relaxation, this time from the RBNZ. The RBNZ Interest Rate Statement and the accompanying press conference are both regarded as high volatility events. The RBNZ is expected to reduce the Official Cash Rate from 6.50 to 5.00 percent, a full one and a half point cut.

Thursday will see economic data coming thick and fast beginning in Australia. At 00:30 Building Approvals and Trade Balance are due. Building Approvals likely recovered 0.2% in October after a 7.2% slump in September. Trade Surplus is likely to remain relatively unchanged at 1.45 AUD after 1.46 AUD in September.

The Halifax House Price Index is due at 08:00 on Thursday. This index is the first to be released from the UK on the latest month’s housing market with a reading of -1.0% expected for November. In October house prices fell by 2.2% according to the Halifax Bank of Scotland.

At 12:00 we will see the BOE Interest Rate Statement. The MPC is expected to vote for a 1.00% Official Bank Rate cut to 2.00% as they look to manage the UK’s economic downturn.

Speculation is rife that the ECB will cut rates heavily on Thursday after the Flash CPI Report showed that consumer inflation had fallen to just above the ECB’s 2.0% target. Expectations are for a 0.75% cut in the Minimum Bid Rate to 2.75% when the ECB Interest Rate Announcement hits news wires at 12:45.

At 13:30 we will see high volatility announcements from three different economies. The ECB Press Conference will be closely watched as traders look for clues to future monetary policy shifts from the ECB. At the same time traders will be watching Initial Jobless Claims as a figure above 500K is expected once again. Canadian Building Permits are also due with a 6 percent decline anticipated for October.

The Canadian Ivey PMI is due at 15:00 on Thursday. The Index has managed to hold its head above the expansion/ contraction line at 50.0 until this point with economists expecting a reading of 50 dead this time around.

Further high volatility is expected with Fed Chairman Bernanke’s involvement with the President’s Conference on Homeownership and Mortgage Initiative in Washington DC at 16:15.

Friday will be dominated by employment data from North America. At 12:00 Canada will release its Employment Change and Unemployment Rate numbers for November. Employment Change is expected to show -21.0K compared to 9.5K jobs added in October. The Unemployment Rate in Canada is likely to increase to 6.4% from 6.2% previous.

The US economy has been shedding jobs at a rapid rate recently and economists are expecting another bout of negative data for the month of November. Non-Farm Employment Change from the Bureau of Labor Statistics is likely to show that 320K jobs were lost in November to add to the 240K cut in October. The US Unemployment Rate, also due at 13:30, should increase to 6.8% from 6.5% seen one month previous.

Without a shadow of a doubt next week’s major news story will be the election of the 44th President of the United States. Who will it be, McCain, Obama? We will have to wait until late Tuesday or the early hours of Wednesday to find out but the US Presidential Election is bound to dominate news wires this week.

So how will financial markets react? Generally speaking, domestic markets attempt an optimistic rally when new leaders are elected. Of course this relies on the premise that policies and conditions facilitating economic growth were bad/ worse under the previous management.

Taking this into account, are we seeing some “buy on rumour” type trading in the US stock market? Last week the S&P 500 and the DOW both had their largest rallies since 1974, up by more than 10%. There seems little doubt that the financial rescue plan is playing a huge part in this relief rally but the market also seems to be responding favourably to Obama’s 7-point lead in the polls.

Last Week
If traders were paying strict attention to last week’s economic releases they may have been forgiven for thinking a stock market rally lacked fundamental justification. This is because 4 out of the 5 high volatility economic indicators released last week pointed to economic slowdown. Consumer Confidence, Core Durable Goods Orders and GDP data all pointed towards contraction while the Federal Funds Rate was slashed by a further 0.50% to 1.00%. Only New Home Sales managed to post MoM growth. Worryingly however, median prices fell to a new four-year low.

This Week
This week’s first high volatility event will arrive on Sunday at 21:45 with New Zealand’s Labour Cost Index. On a quarterly basis the index is expect to increase by 0.8%, in line with that of the previous quarter.

In the early hours of Monday morning we will see Australian Retail Sales Trend. Monthly growth of 0.2% is expected after September’s 0.3% rise.

The rest of the day will be dominated by manufacturing data. The UK’s Manufacturing PMI is due at 09:30 with economists expecting a reading of 40.0. Anything below 50 represents industry contraction so Sterling traders will welcome surprises to the upside.

At 15:00 the US ISM Manufacturing PMI is due to be released. September’s reading was 43.5 and the contraction is expected to deepen in October with a 41.6 consensus estimate.

At 16:00 in the UK we will hear testimony from BOE Governor King, Chancellor of the Exchequer Darling and FSA Chairman Turner on the recent banking crisis. The trio are due to testify before Parliament’s Treasury Committee, in London.

Aside from the US Presidential Election, Tuesday will be fairly quiet on the economic front. In the early hours of the morning we are due to see further tightening of global interest rates as the RBA’s Interest Rate Statement is expected to reveal a further half point cut to 5.50%. This represents a fall of 1.75% since August this year.

Wednesday will be a much busier day beginning early with Australian Building Approvals and Trade Balance. Following on from a 3.7% MoM contraction in the number of permit approvals in September, October’s rate is also expected to fall, by 1.1%. Trade Balance will likely fall to 0.50B AUD from 1.36B previously.

At 09:30 the UK’s manufacturing Industry will come under further scrutiny courtesy of Manufacturing Production which is expected to fall by 0.4% MoM. At the same time Services PMI is expected to reflect further contraction, dropping from 46.0 to 44.5.

As a precursor to official data from the Bureau of Labor Statistics later in the week, ADP’s Non-Farm Employment Change will be closely watched at 13:15. Economists are expecting a reading of -100K in the number of employed people in October.

At 15:00 the ISM Non-Manufacturing PMI is expected to worsen from minor expansion in September to 47.3, a reading that would indicate contraction in October.

New Zealand employment data comes to the fore on Wednesday evening at 21:45. Employment Change and Unemployment Rate are both due to be released. Employment Change is expected to show 0.8% fewer people were in employment over the previous quarter. This data contributes to the expected sharp increase in the Unemployment Rate to 4.3% from 3.9%.

Hot on the heels of similar data from New Zealand, Australia will report Employment Change and Unemployment Rate at 00:30 on Thursday morning. It is expected that the Aussie economy shed 10K jobs in October with Unemployment duly up to 4.4% from 4.3% in September.

The BOE Interest Rate Statement is due at 12:00 with the MPC expected to cut the Official Bank Rate to 4.00% from 4.50%. The Global interest rate focus will remain intact at 12:45 with the ECB Minimum Bid Rate Announcement. The ECB is also expected to cut by half a point, down to 3.25% from 3.75%. Traders will be very interested in the ECB Press Conference at 13:30 for an insight into ECB sentiment and the possibilities of further rate cuts.

Also due at 13:30 is Canadian Building Permits data. September saw a huge 13.5% fall in the number of permits issued with another 1.3% fall expected in October. Also from Canada at 15:00 is they Ivey PMI. This indicator attempts to reflect the health of the economy as a whole and expansion is expected to slow to 56.0 from 61.0 previous.

Friday’s focus will be on data from North America with Canadian Employment Change and Unemployment Rate getting things started at 12:00. The Canadian economy impressively added 106.9K jobs in September with 10K less jobs expected for October. Unemployment Rate is expected to worsen slightly, up to 4.2% from 4.1%.

At 13:30 we will see one of the most highly anticipated releases in the economic calendar. Non-Farm Employment Change from the US is expected to show 200K fewer employed people in October after 159K less in September. Unemployment rate, due at the same time, is expected to worsen from 6.1% to 6.3%.

There will barely be time for the dust from Non-Farm Payrolls to settle before Pending Home Sales are released at 15:00. With September’s MoM increase of 7.4%, sales in October likely fell by 3.4%.

This week will be rounded off by the New Zealand Parliamentary Election on Saturday. Although the impact on global markets will be limited there should be some effect on the New Zealand Dollar early next week.

Last week was a key week in terms of economic indicators. We saw central bank interest rate announcements from the RBA, BOC, BOE and ECB and key employment data from the US.

All interest rate announcements came in as expected but US employment data managed to surprise to the downside. Non-Farm Payrolls fell more than expected (-84K) for August and the Unemployment Rate jumped from 5.7 to 6.1%. This represents the highest rate since September 2003.

Despite this negative US economic news the Dollar remained firm, supported by carry trade unwinding and a further fall in oil prices. NYMEX crude oil posted a weekly low through the $110 level at $105.13.

This Week
Early market focus will be centred on a rumoured announcement from US Treasury Secretary Paulson due on Sunday evening. It is expected that he will announce a plan for the US Government to take control of Fannie Mae and Freddie Mac for at least a year.

This week will also play host to a 3-day OPEC meeting that takes place in Vienna. Running from Monday through to Wednesday, the main body of the programme is scheduled for Tuesday. Traders will be watching for any unscheduled announcements made to the press throughout the 3 days.

Monday begins with an RBA testimony before the House of Representatives Standing Committee on Economics. Lead by Glenn Stevens, the RBA will testify on the latest semi-annual economic outlook.

At 09:30 the UK PPI Input number is due for release. The number is expected to fall by 1.2% after a -0.6% reading for July.

Later in the day we have a high volatility event from Canada. Building Permits will be released and further contraction is expected. July saw -5.3% and a further -1.0% is expected from August.

Tuesday will bring us more high volatility with Australian data first up. At 02:30 we will see both Home Loans and Retail Sales. Home Loans posted a -3.7% for July and a month-over-month 0.0% move is anticipated for the month of August. Retail sales, on the other hand, are expected to post a mild recovery. July figures were reported at -1.0% but numbers for August should show a 0.5% increase.

In the UK session traders will be focussed on Manufacturing Production. A number of -0.1% is anticipated after a -0.5% report in the previous month.

Further Canadian construction data is due on Tuesday at 13:15. It comes in the form of the Housing Starts report and is expected to show 194K new residential constructions getting underway. This would be an improvement from the 187K annualized reported in August.

The first high volatility economic indicator from the US is scheduled for release at 15:00 on Tuesday. Pending Home Sales MoM are likely to have fallen by 1.2% in August after a 5.3% increase in July.

On Wednesday we will see the first high volatility event from the Eurozone. ECB President Trichet will testify before the European Parliament Committee on Economic and Monetary Affairs in Brussels.

Towards the end of the day (22:00) we have the RBNZ Interest Rate Announcement. It is expected that the RBNZ will cut interest rates for the second time in 2 meetings to 7.75%. This will be an interesting event because the last cut (happened back on the 23rd of July) surprised most market participants.

Thursday is often the busiest day in terms of economic releases and this week is no exception. For the second time in 3 days Australia leads the field with two high volatility events at 02:30. This time Employment Change and Unemployment Rate are to be reported. Employment Change is expected to come in at 5.5K jobs created while Unemployment Rate could increase from 4.3% to 4.4%.

Thursday will also play host to the third central bank testimony of the week. The BOE MPC, including Mervyn King, will testify on the August 2008 Inflation Report before the UK Treasury Committee at 09:45.

At 13:30 we have a high volatility announcement from Canada and the US. Both countries will be reporting their latest Trade Balance figures. Canada is expected to report a surplus of $5.6B from $5.8B in the previous month while the US deficit is likely to increase to $58B from $56.8B previously reported.

Finally for Thursday we have Core Retail Sales and Retail Sales from New Zealand. Last month’s Core number came in flat at 0.0% while the raw number posted a 0.9% gain. This month data is expected at 0.2% and -0.3% for Core Retail Sales and Retail Sales respectively.

Friday will be dominated by high volatility data from the United States. At 13:30 we will see Core Retail Sales, Retail Sales and PPI (supported by our Visual Analysis tool). Core Retail Sales are expected to contract by 0.2% MoM while Retail Sales should be up by 0.2%. The Producer Price Index is expected at -0.5% after last month’s 1.2% gain.

At 14:55 we have the final high volatility announcement from the US and for the week in the shape of the preliminary University of Michigan Consumer Sentiment. Sentiment is expected to increase to 64 from last month’s revised figure of 63.

For full details of this week’s economic news and daily updates please see our economic calendar and economic speeches pages.