Investors will have a chance to focus attention on key data from Canada’s biggest trading partner in the first week of 2012, hopefully providing a break from the European debt crisis that contributed so much to last year’s dismal performance.

“I wouldn’t be surprised if markets find some distraction as it focuses on North American data as opposed to Europe,” Kate Warne, Canadian markets specialist at Edward Jones in St. Louis, said in an interview.

“But I think it really depends on what happens in Europe as we have for the last two months.”

Traders will take in key economic data on both sides of the border, culminating with Friday’s release of the non-farm payrolls report in the United States and the December employment survey for Canada.

They will also look to other data for reassurance the U.S. can avoid slipping back into recession, including the latest reading on the health of the American manufacturing sector.

The main Toronto Stock Exchange index ended 2011 down 11% from where it started the year and down about 17% from its highs of early March before investor attention became focused on the eurozone debt crisis and worries about a return to recessionary conditions.

There were fears at yearend that many areas of Europe are already in recession as heavily indebted countries such as Italy and Spain enacted severe austerity measures that choked off economic growth.

A severe downturn would significantly lower demand for oil, copper, coal, wood and many of the resources that Canada produces, as well as manufactured goods made in this country and its major trading partners..

That would squeeze Canadian profits, eroding a main driver of share prices.

The U.S. employment report is the marquee event of the week with traders hoping for a continuing — albeit very modest — improvement in job creation.

“I would think it might be slightly stronger than (the last two months),” said Warne.

“And the reason is that we have seen some of the indications that growth seems to be picking up in the U.S. in the fourth quarter. I think the tone got stronger in the job market in the fourth quarter and that could mean we have seen another month where the job gains are a bit stronger than the 100,000 or so we’ve been running out.”

Economists expect the U.S. economy created 140,000 jobs, on top of the 120,000 from November. However, they also expect that the jobless rate edged up by 0.1 of a percentage point to 8.7%.

It is also expected that Canadian employment will see an improvement following a surprise drop of 19,000 jobs during November.

The consensus among economists is that the Canadian economy added 25,000 jobs in December, although estimates ahead of recent monthly Statistics Canada reports have been off the mark.

Economists at CIBC World Markets are more cautious than the consensus, forecasting 15,000 net new jobs.

“Ongoing restraint in hiring in the public sector, combined with uncertainty regarding demand at the firm-level, should restrain the pace of hiring,” said a commentary from the bank.

It also expects the jobless rate to remain steady at 7.4%.

The week kicks off with the latest reading on consumer confidence which is expected to show improvement. The Conference Board is expected to report that its key index rose two points to 58 during December.

Analysts are also looking to see continued expansion in the American manufacturing sector with the Institute for Supply Management’s index expected to come in at 53, up from 52.7 in November.

“I would think we will continue to see muted but at least gains on the manufacturing side as well as the services sector,” added Warne.

“Of course at the same time, though, we have some issues due to the flooding in Thailand which would still affect some companies in the fourth quarter as the auto industry again got hit.”

Meanwhile, the ISM’s non-manufacturing sector is also expected show greater expansion, rising to 53 last month from 52 in November.