Tag Archive | "Economic Data"

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US Equities Stalled, European Shares Brighter

US markets absorbed more negative data on Friday and the DOW JONES recorded a second consecutive week of losses as European markets trembled but looked for a brighter future. European shares slid for the second straight day but investors continued to take money for US markets and invest in European markets. Flows into European equities from US funds reached a two-month high in the week ending August 14, 2013. Trading has been light for most of August.

Federal Reserve policy is dictating market stability and speculation that tapering will commence next month weighs heavily on investors. Markets anxiously await the Federal Reserve policy meeting on September 17-18. US equities still show significant gains for the year but European markets are mounting a rally while th FTSEurofirst 300 and Euro STOXX 50 have gained about 8 percent year-to-date and posted gains for the second consecutive day.

By noon, the DOW was down 32.33 points, off 0.21 percent to 15,079.86. The S&P 500 Index was off 5.61 points or 0.34 percent at 1,655.71. The Nasdaq showed a gain of 1.67 points to 3,609.79, a 0.05 percent gain. The FTSAE Eurofirst 300 index jumped 0.03 percent. On Thursday, equities suffered the largest one-day drop since late June. On Friday, the MSCI’s road emerging equities lost 0.5 percent.

Friday’s economic data from the US was less than  encouraging.

On Thursday, a report indicated rising confidence among American single family property owners. The confidence level struck an eight-year high. However, the rapidly rising long-term interest rates has taken a tool on the resale marketplace.

New start for single family homes dipped 2.2 percent in July. However, starts for two-family home spiked 26 percent, completely reversing a downturn in June. July permits for multi-family homes increased by 12. 6 percent while approvals for single family construction slumped 1.9 percent. Overall, July permits climbed to 943,000 units, slightly below projections of 945,000. Housing starts reached an adjusted rate of 896,000 units.

The residential marketplace and new construction is one large factor in projections by JPMorgan and others that growth in the third quarter will reach 2.7 percent.

The overall consumer index reading from the Thomson/Reuters/University of Michigan survey slipped to 80.0, slight underneath July’s six-year high of 85.1. The August reading was the lowest in four months.

Currency Markets

US Treasuries have been volatile. Sparked by surges in British sterling and in the German bund, US notes have been erratic. The benchmark 10-year bond has risen by 1.6 percent since May. On Friday, the 10-year Tresaury was down 25/32 with a yield of 2.8564 per.

The climb in yields drove the dollar up against major currencies. Emerging currencies continued to slide. India’s rupee touched a record low a 62 per dollar. Year-to-date losses are 11 percent. The dollar rose to 97.62 yen. The euro slipped 0.1 percent to $1.3328.      

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Euro, Dollar Strengthen

The dollar drew support from a boost in manufacturing and strong housing gains to spike consumer confidence. Meanwhile, the euro posted surprisingly improved manufacturing as Germany recovered nicely from recent fluctuations. While earnings from giants Caterpillar and AT&T disappointed, US equities only suffered minor losses after reaching historic intraday highs on Tuesday. Gold suffered its first setback in four days.

Equities in Europe sustained reasonable gains on Wednesday. Manufacturing across the 17-nation euro zone indicated that the region’s 17-month recession shows sign of easing.

The news was welcome relief for a market that has become increasingly fixated on unenthusiastic economic data from China and the volatile performance of Japan’s stock market. Chinese manufacturing contracted for the third consecutive month in July and plateaued to an 11-month low.

The US housing report showed existing home sales climbed to a 5-year high in June. Sales spiked despite an increase in lending rates. Conversation in Washington indicated that lending standards might ease for first-time homebuyers, a necessary commodity for a full housing recovery.

US Equities

The Dow closed off 25.50 points settling at 15,542.24 down 0.016 percent. The S&P 500 Index dropped 6.45 points, off 0.38 percent to 1.685.94. The Nasdaq Composite Index closed at 3,579.60 down 0.33 points.

Caterpillar lost 2.4 percent to $83.44 after disappointing quarterly returns and a downward projection for the rest of the year. AT&T lost 1.1 percent to $35.40 as mobile service sales failed to meet projections.

In after-hours news, Facebook reported stronger than expected revenues lifting the stock 15 percent to $26.51.

European Equities

Europe’s FTSEEuroFirst 300 Index held on for a 0.6 percent gain, closing at 1,214.63. Technology had pushed the market higher earlier in the day. Apple’s 6 percent gain to $443.86 put the stvck at its highest level since June 10, 2013.

The MSCI world equity index fell o,25 percent to 375.09. The market suffered from the weak Asian data.


US Treasury yields rose on the strength of the new data and sentiment that the Fed will begin to taper its stimulus. The yield on the benchmark 10-year note jumped 2.581 percent but a Wednesday sale of 5-year notes met with weak demand.

The dollar index gained 0.4 percent to 82.272 on strong momentum just before the close. The gains ended three days of losses.

The euro dipped from a one-month high of $1.3256 to 0.2 percent lower. The euro closed at $1.3198. Volume on the euro/dollar pair reached $4.6 billion in heavy trading.

German and French consumer sentiment polls surpassed expectations creating heavy trading of low positions. The French and German PMI was in sharp contrast to sentiment in China.

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Fed Governor Hawkish Talk Spills Equities

Comments by a hawkish Federal Reserve Governor tamed US equity markets and pushed the dollar higher on Friday, wrapping up a week of high volatility and leaving some investors cautious about the future. The comments also give insight into the tension from his peers that Chairman Ben Bernanke may be feeling. Bernanke is set to retire in the early part of 2014.

However, equity investors have enjoyed a remarkable run in 2013. The S&P 500 ended Friday on a  down note but still managed to record the strongest six months of any year since 1998. The S&P 500 fell 6.92 points after three days of gains. The Dow Jones fell 114.89 while the Nasdaq gained 1.38 points, closing at 3,403.25. The S&P 500 closed at 1,606.28, down for the month of June but still recording the first second quarter gain in four years.

Equity markets around the world have been volatile since May 22nd when Chairman Bernanke hinted that the Fed’s bond buying spree might be tapering down. His confirmation of that in June sent markets into a three day tailspin that has been marked by volatile shifts ever since.

Fed Governor Speaks Out  

Federal Reserve Governor Jeremy Stein and Richmond Federal Reserve President Jeffrey Lacker said on Thursday that the Federal Reserve’s historic accommodation policy could be reduced significantly sooner rather than later. Stein indicated that September may well be the month when Bernanke’s tapering begins.

The speeches unnerved equity investors. Steven Baffico, the CEO of New York’s Four Wood Capital Partners, explained the reaction; “The mixed signals from both the economic data and the Fed’s direction have caused a lot of anxiety and some opportunistic buying and selling, and it’s just created a much less predictive environment going forward.”

Friday volume was the second highest day of the year. 10 billion shares changes hands across the three major US exchanges. For the month, The Dow lost 1.4 percent. The S&P 500 shed 1.5 percent. Nasdaq also lost 1.5 percent.

Consumer Sentiment Running High

Defying the volatility, consumer sentiment improved in late June after Bernanke’s comments. Sentiment was extremely strong among high income earners but weaker in low income families. The Thomson Reuters/University of Michigan consumer confidence index registered 84.1, slightly below May’s 84.5 mark but higher than expectations.

The survey’s director said; “Consumers believe the (economic) recovery has achieved an upward momentum that will not be easily reversed. To be sure, few high or low income consumers expect the economy to post robust gains or think the unemployment rate will drastically shrink during the year ahead.”

Consumer sentiment is a key indicator because consumer spending accounts for 70 percent of the nation’s GDP. However, despite the optimistic view, household expenditures only grew 2.6 percent in the first quarter, well below government estimates of 3.4 percent.

The Institute of Supply Management – Chicago reported that Midwest business activity dropped to 51.6, a dangerous figure. 50 points indicates a contraction. These contradictory indicators typify the economy and add to the sluggishness of the recovery.

The Dollar Post Gains  

Equity market volatility is translating to solid gains for the USD. The dollar continued its upward march against the yen and the euro. The dollar befitted from Governor Stein’s comments.

Michael Feroli of JP Morgan said; “Stein’s remarks cannot be lightly dismissed and raise risks that some on the Committee may have already essentially decided on September. More generally, compared to remarks from Fed officials earlier this week, Stein’s speech was less geared toward calming market perceptions of Fed policy and did less to question market pricing of the first rate hike.”

The euro hit a session low of $1.2990 before closing at $1.3015. Against the yen the dollar rose again closing at 99.2, a gain of 0.9 percent. Dollar/yen activity surged to $4.0 billion. Euro/dollar trade reached $4.3 billion.

Markets are anxiously awaiting this week’s policy release from the European Central Bank. ECB president Draghi is expected to be more dovish than in the past.

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Global Markets Await Federal Reserve Report

The two-day Federal Reserve meeting will conclude on Wednesday with Chairman Ben Bernanke scheduled to conduct a press conference following release of the much-awaited report. Global markets have experienced great volatility since Bernanke’s mixed message released on May 22, 2013.

Ever since, Bernanke has been in the news. On Sunday, President Obama suggested that Bernanke would be stepping down in 2014 after serving 8 years as Chairman. Bernanke’s handling of his press release in May, stirred concerns in global equity and currency markets. It is expected a more carefully worded explanation of current monetary policy will be put forth on Wednesday.

Economic data released today would support a continuation of the existing $85 billion per month bond buying policy. New home construction signaled a stronger recovery in housing that was indicated with strong starts in April. Housing starts are up 6.8 percent to a seasonally adjusted annual rate of 914,000 units. April’s report was also raised from 853,000 to 856,000 new starts.

New permits dipped below April’s strong performance but still reflect the largest number of permits for single family construction in five years. The construction industry has been hit hard by unemployment and contractors report difficulty finding qualified workers and a shortage of building supplies.

May’s 12-mointh core inflation rate remains below the Federal Reserve’s stated goal of 2 percent but does suggest stabilization. The overall CPI jumped 1.4 percent easing concerns about prolonged deflation. This data should not negatively affect the Fed’s decision to scale down its stimulus.

However, the “tapering” of the extraordinary support from the Federal Reserve will be forthcoming but with disappointing growth data from China, high volatility in Japan and unstable conditions in Europe, the dollar is expected to continue today’s improvements against international currencies.

Asian Currencies Decline    

In India and Indonesia, the strengthening dollar or the prospects of a stronger dollar have led to massive withdrawals by international investors. The Indian rupee closed in on another record low to 58.98 per USD compared to the record low of 58.69 set last week. India had attracted more than $12 billion in foreign investment since 2012. The fall could be more severe if markets get what they expect from the Fed’s two-day meeting.

In the last 17 trading session, foreign investors have been net sellers of more than $4.5 billion in Indian bonds.

Indonesia, another Asian entity that relies heavily upon a growing China, saw its rupiah fall 0.7 percent on Tuesday. The fall came on the heels of government action to reduce fuel costs. The central bank was forced to intervene.  The finance ministry was only able to raise 2.65 trillion rupiah of an 8 trillion rupiah offering.

Meanwhile, in the Philippines, the peso fell 0.8 percent to 43.22 USD. The Malaysian ringgit fell 0.8 percent to 3.1580 USD, its lowest rate since July 30, 2012.

If the Federal Reserve announces tapering of its stimulus, the outflows from these nations could be devastating. In Indonesia, foreign investors sold about $1 billion in bonds from May 31 through June 13, 2013. Foreign holdings decreased to 32.4 percent.

Dollar Rallies Against Yen  

Tuesday marked the second consecutive day that the dollar has made headway against the yen. Traders anticipate that Bernanke will extend the current buying initiative but add definition to the inevitable tapering. Tomorrow’s announcement should stabilize equity markets but also give strength to the USD.

Joe Manimbo, a senior market analyst at Western Union Business Solutions in Washington, echoed market sentiment; “The yen’s fresh leg lower today could be a sign that many investors think the Fed will signal a reasonable chance of a taper as later in the third quarter. The yen is seen vulnerable to less policy accommodation from the Fed, a move that would tend to put upward pressure on U.S. Treasury yields, burnishing the greenback’s allure.”

The USD rose 1.1 percent to 95.96 yen after falling to a two-month low of 93.78 yen on Thursday last week. The dollar has touched record highs against the yen since Prime Minister Shinzo Abe radicalized the nation’s currency policy by extreme monetary easing. The liquidity has given rise to Japan’s equities but has greatly weakened the currency.

The Euro Climbs

Despite disappointing data from Germany and the lowest demand for new autos, the euro rose to $1.3385. The climb was based on surprising report from ZEW data, a German analyst firm that showed investor sentiment was improved in June. The FTEU3 shares climbed 0.1 percent on Tuesday.

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Disappointing US Data Shakes Markets

Disappointing economic data and a lackluster projection from the ADP National Employment Report sent US equity markets tumbling as the dollar turned sharply down. The data puts a heavy emphasis on the US Department of Labor’s non-farm payroll report for May which is due to be released on Friday.

The Institute of Supply Management’s services index actually edged up in April rising to 53.7, up 0.6 from April. Analysts had projected a reading of 53.5. A reading above 50.0 indicates expansion but the index has turned steadily downward after a high of 56.0 in February of this year.

Most distracting was the news about the new orders component of the report. New orders hit their lowest rating since July of 2012, coming in at 50.1, down from 52.0 in March.

The ISM report data for services was stronger than the data for the important manufacturing sector, which enjoyed strong performance in the first quarter 2013. New factory orders climbed in April but not rapidly enough to overcome the slowdown in March.

Perhaps the most alarming data came from a report detailed a sharp decline in unit labor costs, which fell by 4.3 percent in the first quarter. This is the lowest rating in four years. Analysts projected that the sharp lowering was due to inflated prices paid in the last quarter 2012 that enabled companies to capture end of year tax benefits before the possibility of impending tax increases.

The ADP report only covers the private sector employment. The precursor to the non-farm payroll report showed the private sector added 135,000 jobs in May, which would indicate a non-farm payroll gain of about 165,000. This will be offset by heavy job losses in the public sector, many which job cuts will be the result of the sequestration. The ADP report also lowered the jobs for April from 119,000 to 113,000.

Reaction to the ADP Report

US equity markets have been ginger since Fed Chairman Bernanke’s last appearance before Congress when he hinted that the Federal Reserve’s easing may begin to gradually decrease. The announcement was met with resistance by the market.

Bad jobs numbers would figure to ensure the Federal Reserve remains active with its bond buying initiative, but Wednesday’s news was met with headwinds across all equity markets. By mid- afternoon, the DOW was down more than 195 points. The S&P 500 was down more than 20 points and the NASDAQ shed more than 40 points.

Chief Investment Officer of the Solaris Group in Bedford Hills, New York, Tim Ghriskey, offered an explanation of the sentiment that ran through the markets; “Not great. Bad news is good news in this market lately because it keeps the Fed accommodative, buying bonds and interest rates low. We’ve seen quite a run in rates as well, in other words yields up and prices down. This could be the type of number that maybe begins to reverse that somewhat.

“The employment gain was below expectations and below the run rate of the first quarter. The rest of it actually looks the same, most jobs came from smaller businesses, most came from the service sector. We continue to see expansion of the workforce, job market, but growth has slowed since the beginning of the year and it is pretty much everywhere.”

Most economists project a slowdown in the second quarter 2012 but the market has defied logic. The equity selloff indicates the underlying edginess of investors.

Another negative factor was the sharp increase in mortgage rates, which could dampen enthusiasm for the recovering housing market. 30-year mortgage rates climbed 17 basis points. 30-year mortgage rates increased to a national average of 4.07 percent, the highest rates since April 2012.

Demand for refinancing also suffered a substantial downturn with applications falling off by 15 percent. New loan requests, a measure of the demand for housing, fell 1.6 percent last week.

If the Friday non-farm report is below 165,000 new jobs, the market could react even more strongly.

US Dollar Plunges

The dollar, which has posted consistent gains against the yen over the past six weeks, slumped on Wednesday, losing about 1 percent and falling below the 99 yen mark. The dollar fell as low as 98.99 yen before rallying to 99.12 yen. Two weeks ago the dollar soared above 103 yen for a brief period.

Japan’s equities continued to gain strength as a result of the weakened yen and the dramatic improvement in liquidity afforded by the Bank of Japan’s newest round of easing. Japan’s retail sales continued to post strong gains. On May 23rd, the Nikkei reached a 5.5 year high soaring to a more than 50 percent rise in 2013.

The euro has gained ground since Bernanke’s congressional appearance. The European Central bank appears poised to stimulate growth and ease austerity measures. This condition caused the German 10-year bond to ease 1.512 percent, down from Monday’s 1.534 percent, the highest in three months.

The euro edged above the $13.0 mark and the USAD gave ground against a basket of currencies on Wednesday.  US oil gained $0.79 to $94.09 per barrel.

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British Sterling In Jeopardy

US Equities looked to be turning down for the first time in over a week after European equities closed with modest gains. The euro shed 0.6 percent settling at 1.3035 as the dollar gave ground to the yen falling 0.27 percent to 96.01. Earlier in the session, the dollar had climbed to its highest rate against the yen since August 2009.

Oil continued to climb rising to $111 a barrel. US oil rose to $92.97 per barrel as crude rose by 5 cents to $110.27.

By noon EST, the Dow Jones Industrials Average was trending lower. The S&P 500 was off 4.13 points at 1,553.09. The Nasdaq was down 15.00 points to 3,237.87.

British Sterling Falls Further

The news from the UK was discouraging and plummeted the pound to 20 month lows with little hope of an immediate lifeline. Sterling fell to a 20-month low against the dollar to $1.4832.

The most damaging data came from the UK’s January manufacturing output. The decline marked the fasted downward spike since June 2012. Analysts expect the downward slide to continue as there is not economic data to suggest any strength.

Of late, sterling has suffered due to the nation’s credit downgrade and very low levels of economic growth. The UK is locked in many positions contrary to the members of the European Union and the natives are restless. The Bank of England has discussed the need for more quantitative easing which could sink the currency further.

The euro continued to rally against the pound reaching a two-week high at 88.77 pence, closing in on the 16-month high of 88.15 met on February 25. The BoE reported that losses against the dollar and the euro forced the sterling’s trade-weighted index to 77.9, a 20-month low.

Chief FX options strategist at Barclays Capital explained the dilemma facing the BoE. “If economic data continues to remain weak, like we saw today, it could make it easier for the BoE to loosen policy. Although our base case is for no more quantitative easing from the BoE just yet, it is a very finely balanced call.”

A serious problem for the Brits is that the spreads between the two-year US bond yields and the British two-year bonds are leaning toward the US, which, in turn, keeps demand for the dollar restrained. Market analysts observe that investors are selling sterling in favor of the dollar, not the euro. The US economic outlook is more stable that the euro.

2013 Performance Weak

The British pound has fallen 8.3 percent against the dollar and 7 percent against the euro. Sterling is the worst performing of the established currencies this year.

Minutes from BoE meetings indicate there is little reason to be optimistic about the economic trend of the UK. The most common opinion is that Chancellor George Osborne will give the BoE more latitude with inflation constraints, paving the way a period of quantitative easing and asset purchases.

The fear is that the Fitch ratings agency will follow Moody’s lead and also reduce the country’s credit rating. Neil Mellor, the Bank of New York’s currency strategist, said; “There are concerns on just about every front for the UK, political concerns, whether there will be another downgrade, the budget and whether or not we will see more monetary stimulus, everywhere you look there is a negative for sterling.” Expect more decline as the euro and dollar continue to stabilize.

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Positive PMI Report May Hold UK Recession Off

Taking a page from the US consumer, British consumers bucked current economic data and produced some unexpected PMI gains for February. The services sector, which constitutes three-fourths of UK GDP, grew at its fastest pace in five months and may well have lifted the onus of the country’s third recession in four years from the economy.

The country’s Purchasing Managers Index (PMI) rose in February to 51.8, surpassing January’s mark of 51.5 in January. The median economist PM forecast from analysts was 51.0. The report comes on the heels of the worst construction PMI in three years. After the economy shrank in the fourth quarter 2012, GDP seemed poised for another fall in the first three months of 2013. Those fears may be subsiding based on these stronger than expected numbers.

The Markit PMI report neither includes data regarding the retail sector nor data regarding the public sector. However, Markit reports that optimism about future business activity is strong, reaching a nine-month high at 67.6 up from 67.2 in January.

Inflation has cut into profits in the service sector but transport, storage, communication services, financial intermediation, business services, personal services, computing services, hotels and restaurants all reflect encouraging activity.

To add support to the PMI, the British Retail Consortium reported the best sales volume in more than two years. Most surprising is a boost in home sales. These purchase shave led to an increase in the sales of furniture, home goods and electrical goods.

The Bank of England

The dim construction report led to speculation that the Bank of England would resort to another round of quantitative easing, raising inflation concerns and devaluing the pound. Prior to the PMI report, Reuters analysts estimated there was a 40 percent chance of another easing initiative. The jury is still out on this verdict.

33 Percent of Brits Support Anti-EU Policy

In news that looks discouraging for Prime Minister David Cameron, a poll by YouGov indicates that there is growing support to pull out of the EU. Cameron has promised an up-down vote in 2017. Cameron’s Conservative Party appears to be losing ground to opponents of the EU treaty.

The YouGov poll suggests that Cameron waited too long to announce the long-awaited vote.  Liberal Democrats are poised to take a leadership role in Parliament and at the top. Led by Deputy Prime Minister David Clegg, Liberal Democrats received the biggest share of supp0ort in the YouGov poll.

Bonus Controversy

Recent EU legislation may well be the last straw for Britain and the EU.  Chancellor George Osborne has apparently failed in his efforts to block restraints on earning of bakers, investment bankers and risk takers. Although Germany asked a review of the new agreement which would limit the amount of bonuses bank leaders could capture, the majority of EU members states support the new controls.

Unlike in the US, the EU opposes commissions earned through risk taking that would require public bailout if the gamble failed. Commissions revealed in the wake of the 2008 meltdown offended the senses of most Europeans.

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US Equities Surge

A confluence of encouraging economic data and a seemingly softening and seemingly positive tone from Republicans in the House of Representatives paved the way for the continued rise of US equity markets. Despite a relatively disappointing performance by Apple, equity markets fed off early morning economic data and climbed sharply, a trend that has seen the equity markets rise in 11 of the last 12 days.

US Labor Department

The Department of Labor released their weekly report indicating that claims for unemployment benefits decreased by 5,000. The seasonally adjusted rate dipped to 330,000, the lowest level of unemployment in five years. The national average remained steady at 7.8 percent. The report is bolstered by decisions of employers to hold back on proposed layoffs after the holiday season.

Purchasing Managers Industry Index

The Purchasing Managers Industry Purchasing Index for January jumped to 56.1, the highest rate in nearly one year. As a measure of growth, a rate of 50 is a good indicator of expansion. The rise a more than 2 points higher than the index in December. A preliminary projection from Markit has indicated their expectation that the index would slip to 53.0.

China, Euro Zone Stabilizing   

Despite fears about Spain and the weight of Greece, news from the euro zone continues a level of stability. At the same time, a manufacturing and export recovery in China has helped to lift the economic outlook across the globe.

The employment data and the purchasing index have been awaited with interest to see how the tax policy of the fiscal cliff settlement would impact employers and consumers. While stability in these sectors is a positive sign, the key to financial growth will require resolution to the country’s budget and debt burden. Only then will US corporations, fully supplied with capital, spur growth.

Debt Level Extension

In a move that appeared to be a modest move to the middle, House Republicans passed legislation increasing the debt limit and foregoing the anxiety of another debt ceiling crisis for another four months. 33 Republicans and 111 Democrats voted against the bill which carried 285-144.

House Democrats were skeptical about the bill for fear that the country would be faced with another cliff come May. Prior to the May debt ceiling extension debate, the next debate will revolve around the sequestration. It is expected that the Republicans will use the debt ceiling extension as leverage during the upcoming debate.

Republicans are pointing to necessary cuts and revision to social programs as a necessity of the upcoming debate. In his inaugural speech, President Obama subtly suggested a need for strengthening social programs, which indicates reform. It is expected that Obama will have to soothe Democratic jitters to revise the country Medicare, Medicaid and Social Security programs.

House Majority Leader Boehner is pressing for a 10-year budget that would be balanced. As such, a provision of the House bill requires the Senate to submit a budget for 2014. If the budget is not forthcoming, Congressional pay will be suspended until such time as a 2014 budget is passed. The US fiscal year commences October 1, 2013. The “no-pay” condition is one that American taxpayers support with vigor.

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Unemployment Data Improves, Fiscal Cliff Looms

Today’s US Labor Department’s Non-Farm Payroll Report surpassed expectations and added to other recent economic data to paint a better picture of a recovering economy. However, the impact of Hurricane Sandy has yet to be measured. The Labor Department report will likely be viewed very differently by political camps and presidential nominees.

The report positively adjusted employment for August and September by an additional 84,000 jobs. This is a welcome upward adjustment that accompanies what can only be regarded as a solid report. The private sector added 184,000 jobs. The public sector trimmed 13,000 jobs, half of which were trimmed from local governments. Despite the strength of the numbers, the unemployment rate rose by one tick to 7.9 percent.

The momentum is positive but most likely not sufficient to deter the Federal Reserve from continuing its buying spree, QE3. The consensus among analysts seems to be that the report is an improvement but there remains much work to do.

About the report, David Cast, an economist with 4Cast, Ltd. in New York said, “Generally it is positive — the payrolls were strong and the unemployment rate sustained most of its fall from last month and the household survey has a decent mix of rising employment. Even manufacturing was positive which is a surprise and there was a strong rebound in professional and business employment, which has been weak in the last couple of months.

Overall a positive report, although the only negatives were that the work week and earnings data were a little softer than expected. So it is not all strong. We got decent upward revisions to the last two months, so generally there is a positive picture although not everything is strong.”

The unemployment rate is 7.9 percent. Currently, there are 12.3 million unemployed Americans.

Unemployment be demographics shows:

Blacks – 14.3 percent

Whites – 7.0 percent

Hispanics – 10.0 percent

Asians – 4.9 percent

Adult men – 7.3 percent

Adult women – 7.2 percent

Teenagers – 23.7 percent

Other important data

Long –term unemployed (persons out of work 27 weeks or longer) – 5 million persons.

Long-term unemployed account for 40.6 percent of the total unemployed.

Civilian workforce rose by 578,000 to 155.6 million in October.

Labor force participation increased to 63.8 percent.

The employment to population ratio held at 58.8.

The number of part-time workers dropped by 269,000 to 8.3 million in October.

2.4 million Americans have looked for a job in the past 12 months.

There were 813,000 discouraged (not looking for work) workers in October; 154,000 lower than one year ago.

Sectors Showing Growth

Professional and business services – +51,000

Healthcare – +31,000

Retail trade – +36,000

Leisure and hospitality – +28,000

Construction – +17,000

Mining – -9,000

The average non-farm workweek was 34.4 hours. The average manufacturing sector workweek slipped 0.1 hours to 40.5 hours. Factory overtime remained unchanged at 3.2 hours. The average workweek for non-supervisory workers slipped 0.1 hours to 33.5 hours. The average hourly wage fell $0.01 to $23.58. The average wage for non-supervisory workers fell $0.01 to $19.79.

In Summary

In addition to this report, US factory orders rose 4.3 percent. The report solidifies that before Hurricane Sandy, the recovery was trudging along carefully. The biggest weight on the economy is not the election. The overwhelming burden on the economy is the fiscal cliff. Businesses with money are on the sidelines waiting to see if Congress will enact a meaningful solution before the December 31st deadline. For the private sector to move ahead, Congress must create a balanced and comprehensive deficit reduction solution. The time to act is now, not in January and not four months down the road. The world is watching.

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South Korean Inflation Likely To Boost Bank Cuts

With Statistics Korea showing price inflation in the South Korean economy declining to the slowest pace in more than a decade, it all but confirms that the Bank of Korea’s next move will be a rate cut.  According to statistical data, annualized price increases slowed to 1.5%.  On a month over month comparison, the measure actually showed a decline of 0.2%.

Now by itself, the figure is rather shocking.  The slowdown follows an annualized pace of 2.2% in the prior month, and is below forecasts of 2.0%.  But when combined with additional economic data, the report is downright pessimistic and confirms that Asia’s fourth largest economy is set to slow down even further in the coming quarters.  The sentiment is in line with sentiment shared by the BoK’s Governor Kim Choong Soo.  Last month, Governor Kim noted that the pace of expansion in the economy was placing current forecasts for a 3% pace of growth in jeopardy.  The announcement prompted downward revisions in Korea’s forecasted annualized growth.

Further evidence of a slowdown can be seen in recent export reports that show the steepest decline in South Korean exports since the depth of the global financial crisis, and manufacturers’ confidence that remains severely depressed.

The recent spate of data leaves plenty of room for Bank of Korea policymakers in readjusting the benchmark rate lower, especially when the sentiment is in line with other regional central banks.  The People’s Bank of China is expected to issue at least two more rounds of rate cuts, in addition to further monetary easing, with Japanese counterparts siding with further asset purchase plans.

Ultimately, rate cuts would help to boost morale in the economy and the South Korean won.  Looser monetary policy would help to ensure the competitiveness of South Korean manufacturers and help to buttress a domestic consumer base that is suffering under amassed credit loans.  In addition, even with a forecasted rate cut of 25 basis points, yields in the Asian economy remain higher by 250 basis points.  This will keep trader and investor interest in the currency piqued, especially dollar holders, at least for now.


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