Weekly Market Outlook: U.S. December ISM Manufacturing in Focus

Insights  – Due to the New Year holiday, financial market volatility may be limited this week, but investors should focus on the U.S. December ISM. Among major economies, the U.S. has shown relatively strong performance, primarily driven by the service sector, while manufacturing has remained sluggish since July.  

Richmond Fed President Thomas Barkin is scheduled to speak, which could bring some volatility to the U.S. dollar this Friday. Investors should also watch the U.S. initial jobless claims data for the week ending December 28, released on Thursday. With labor force participation declining and unemployment rates rising, the labor market continues to cool. If this trend persists, it could weigh on the U.S. dollar index and provide support for gold prices.  

Last week, market volatility was limited due to the Christmas holiday. However, U.S. factory orders for business equipment in November showed a rebound, posting the largest monthly increase in over a year, offering a glimmer of optimism for the U.S. economy.  

Meanwhile, minutes from the Bank of Japan’s October policy meeting revealed that some committee members emphasized the need to carefully assess the impact of previous rate hikes on the economy and prices. One member advocated for slowing the pace of rate increases. Additionally, Japan’s December CPI accelerated to 2.4% year-over-year, indicating continued inflationary pressures. Japan’s nationwide core CPI has now remained above the BOJ’s 2% target for two and a half years.  

1. U.S. December ISM Manufacturing Index  

The U.S. December ISM Manufacturing Index will be released this Friday (January 3). Last month’s data showed that November manufacturing stood at 48.4, with a smaller-than-expected contraction. New orders recorded their first increase since March of this year.  

While U.S. manufacturing remains in contraction, most sub-indices in the November ISM Manufacturing PMI showed improvement. The overall PMI, which hit a five-month high, suggests manufacturing may be stabilizing after two years of weakness.  

Analysts believe that if the actual data falls short of expectations, particularly if the price index weakens, the U.S. dollar could face slight downward pressure. 

2. U.S. Initial Jobless Claims

The U.S. labor market is cooling, and initial jobless claims data for the week ending December 28 will be closely watched. Last week, initial claims fell to their lowest level in a month, consistent with a labor market that is cooling but remains healthy. This trend may lead the Federal Reserve to hold off on further rate cuts in the near term.  

The U.S. Department of Labor reported on Thursday that initial state unemployment claims fell by 1,000 to a seasonally adjusted 219,000 for the week ending December 21, in line with economists’ expectations of 224,000 from a Reuters survey.  

Since Thanksgiving, jobless claims data has been somewhat volatile, which economists attribute to seasonal factors, such as an increase in temporary hiring for the holiday season. Nevertheless, the latest figures remain consistent with the past year’s average of slightly above 220,000, with no significant signs of an upward trend. 

3. Limited Market Activity Ahead of New Year’s Holidays  

Due to New Year’s holidays, trading hours will be shortened or markets will close entirely in many regions this week.  

Tuesday (December 31):

Brent Crude Oil futures trading on ICE will end early at 4:00 AM Beijing time (January 1).  

Tokyo Stock Exchange and Seoul Stock Exchange will remain closed for the day.  

Markets in Germany and Italy will close for the day, while the French market will trade for half a day.  

The London Stock Exchange will close early at 8:30 PM Beijing time.  

The Sydney Stock Exchange will close early at 11:10 AM Beijing time.  

Tuesday (December 31) in China:

Shanghai Gold Exchange, Shanghai Futures Exchange, Zhengzhou Commodity Exchange, and Dalian Commodity Exchange will have no night trading.  

The Hong Kong Stock Exchange will trade for half a day, closing randomly between 12:08 PM and 12:10 PM.  

Key Economic Data:  

Monday: U.S. November Pending Home Sales Index (MoM)  

Thursday: U.S. Initial Jobless Claims for the Week Ending December 28

Friday: U.S. December ISM Manufacturing PMI  

Key Economic Events:  

Monday: Reserve Bank of Australia Assistant Governor Jones participates in a fireside chat.  

Tuesday: Chinese President Xi Jinping delivers the 2025 New Year’s Address via national television and the internet.  

Saturday: Richmond Fed President Thomas Barkin, a 2027 FOMC voting member, delivers remarks.