The December employment report shows 21,600 jobs created and a drop in the unemployment rate to 5 per cent.

The market was looking for 18,000 jobs created and a flat unemployment rate of 5.1 per cent. In November, before any revisions, there were 37,000 jobs created, 43,400 of which were part-time, and unemployment was at 5.1 per cent.

It's the first of this year's tier one economic data to arrive.

It has not been a positive confession season according to Macquarie, which notes this morning that the four-week rolling I/B/E/S Australian net earnings measure is negative, indicating more negative revisions than positive revisions.

Analysts have been downbeat on news from Orocobre, Wesfarmers, Suncorp, IAG, Whitehaven Coal, South32, Medibank Private, Pendal Group, Sims Metal Management, BHP Group, Perpetual, NIB and James Hardie.

An upbeat mood has arrived from Woodside Petroleum, Fortescue Metals, Saracen, ASX, Northern Star, and Magellan.

The market has arrived at a slightly higher P/E ratio of 15 times this month, compared to 14.5 times in December.

Morgan Stanley has weighed in on Challenger's Wednesday downgrade, which dispells some misconceptions of Challenger as a low beta defensive stock, argues analyst Daniel Toohey. Returns are highly geared to investment markets, and the broker now estimate 2018-19 real return on equity falls to 6 per cent versus a cost of equity of 11 per cent.

The broker has a "underweight" rating on the stock with a $10.50 price target.

Challenger share price took a 17.1 per cent hit on Wednesday, closing at $7.65 on the announcement it expected its 2019 earnings to be between $545 million and $565 million, down from a previous guidance of $591 million and $613 million.

The S&P/ASX 200 Index has opened 0.15 per cent higher and it looks like another day of pain ahead for Challenger shareholders.

Morgan Stanley's Australian equity strategy team led by Chris Nicol note that the bank's US economists now expect the Federal Reserve to pause in lifting interest rates in March.

Any shift in US interest rate expectations has ramifications for the currency markets, and Mr Nicol notes that a more patient Federal Reserve "would normally be a boon for the Australian dollar given interest rate diffentials."

This time, however, the weakening Australian housing market and a cautious consumer is pressuring the Australian economy, the strategist noted.

"This has yet to fully play out,and we expect this will see the Australian dollar continue to depreciate through the first half of the year."

Santos, Australia's No. 2 independent gas producer, on Thursday reported a 21 per cent rise in fourth-quarter revenue, boosted by the acquisition of Quadrant assets and higher realised prices for its oil and gas.

Quarterly revenue came in at $1.04 billion compared with $861 million a year earlier, the company said in a statement.

The Adelaide-based firm said production for the quarter ended Dec. 31 rose to 15.9 million barrels of oil equivalent (mmboe) from 15 mmboe a year ago.

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The Commonwealth Bank flash PMI fell to 51.5 in January, the lowest reading since the index started three years ago. A reading below 50 signals economic contraction.

"Survey respondents have noted some genuine weakening in demand, especially on the services side of the equation. The impact of the drought is also biting in some areas," Commonwealth Bank's chief economist, Michael Blythe, said.

"Business concerns are focussed offshore. But despite worries about trade war risks and slower global growth export orders are holding up."

According to the survey, earlier signs of business inflation pressures have receded, with lower fuel prices helping to keep a lid on business input costs.

The Australian dollar is set to drop more than 15 per cent in value this year against the greenback, in an "even more bearish" updated forecast from Capital Economics.

Capital Economics sees the local currency falling to US60¢ this year and hovering there through 2020; it previously forecast it at US65¢ for 2019 and US70¢ for 2020.

"While we have been negative on the prospects for the exchange rate for some time, we previously thought that relative interest rate expectations would prevent it from falling too far," Simona Gambarini, the firm's London-based markets economist, said.

Sydney's median house price is set to slip below the $1 million mark in the next six months – a milestone it cracked in 2015 – if prices continue to fall at their current rate.

House prices in the harbour city fell 3.2 per cent over the December quarter and 9.9 per cent over the year – the biggest annual drop of all the capital cities – to $1.062 million, according to Domain Group's quarterly house price report.

Nationally, house prices are now 6.5 per cent lower than they were a year ago, while unit prices fell 5.3 per cent over the year and 2.9 per cent over the quarter.

An ABS jobs data release on Thursday will be closely watched by the Reserve Bank, economists say, as the central bank hopes strong employment will continue to support the domestic economy.

The Australian Bureau of Statistics will release its monthly employment data on Thursday and consensus among economists is that the data will show the unemployment rate held flat at 5.1 per cent and 18,000 jobs were added to the economy over December 2018.

The November 2018 jobs figures from the ABS showed unemployment rise 0.1 per cent, from 5 per cent in October to 5.1 per cent in November. Economists had expected the rate to hold flat.

NAB senior economist David De Garis said he was forecasting higher than consensus jobs growth through December 2018.

"We're going to see another pretty strong print in employment. Our estimate is that employment probably rose by about 25,000, so it's suggesting that the employment story is continuing to unfold."