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The Week Ahead: OPEC Put To The Test

After the long festive break, the economic calendar returns to some semblance of normality, albeit slowly.

The Organisation of Petroleum Exporting Countries (OPEC) will face its sternest test next week, as 1 January 2017 marks the first day of production cuts. It is the first time in 15 years that OPEC and non-OPEC countries have agreed to cut production. Keep an eye on Keppel Corporation (SGX: BN4) and Sembcorp Marine (SGX: S51), which tend to react to oil prices.

The US will report those closely-watched Non-Farm Payroll numbers again. Apart from a blip in May, job creation in America has been remarkably strong. In November, 178,000 jobs were created, with gains in professional, business and healthcare.

Closely linked to the Non-Farm Payroll is the US unemployment rate, which is due out on Friday. In November, the rate of unemployment fell to 4.6%, which was the lowest since August 2007.

China will report its latest Caixin Manufacturing and Services PMIs. The two indices almost define the direction of the Chinese economy. Anything less than 50 could be seen as a disappointment for China, a humiliation for the Chinese government and a worry for rest of the world.

The impact of the Japanese economy on the rest of the world should not be underestimated. It is still the world’s third-largest economy. Next week, Japan will report Services PMI. It tracks essential services such as sales, employment, inventories and prices. A reading of more than 50 could imply that the Abe government is on the right track with its economic revival.

Consumer prices in the Euro Area inched up to 0.6% in November. It was the six successive month that the inflation rate has risen. It was also the highest inflation rate since April 2014. Can this continue when the latest inflation numbers are announced.

And finally, Singapore will report advanced growth rate for the fourth quarter. In the third quarter, economic growth came in at 1.1%, which was lower than the previous quarter, but better than market estimates.

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