Tag Archive | "Labor Department"

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Weather Sinks Jobs

Weather took the blame for a second consecutive non-farm payroll report as equity investors blinked but quickly recovered leaving the dollar and bond market to shoulder the load on Friday. With projections for about 185,000 new jobs in January, the Labor Department’s final report January card was a dismal 113,000 new jobs gained. Compiled with the disappointing 74,000 net gain in December, the under-200,000 two-month report was initially interpreted as softness in the economy.

However, a strong US consumer credit report turned the market around as investors realized the powerful American consumer seems undeterred. The Federal Reserve announced that total consumer credit in December rose $18.8 billion to $3.1 trillion, the biggest gain since February 2013.  

Analysts had projected in increase of about $12 billion. Meanwhile, revolving credit, which measure credit card growth, climbed by $5 billion in December. Both measures point to an engaged consumer, a definite boost to the economy.

Non-revolving credit increased $13.8 billion in December. This includes auto loans and government initiated student loans. Non-revolving credit only expanded by $465 million in November.

A New Course For Yellen?

Speculation immediately arose concerning a new direction by the Federal Reserve. Despite the weak private sector job growth, the nation’s unemployment rate fell 1 percent to 6.6 percent, the lowest rate in five years.

Initially, the Fed set 6.5 percent unemployment as the target to halt bond buying. Most investors and analysts suspect the Fed will fine tune initial goals and tie easing to the broader ranging SEP (Summary of Economic Projections). Investors seemed content that the weak jobs report was a blip in the overall economy, mostly resulting from severe weather that has paralyzed areas of the country in the past two months.

And, February weather has also been difficult. The Fed is scheduled to meet with Janet Yellen at the helm on March 18-19, when revisions to policy could be announced. The February non-farm payroll report will be released before the meeting so Yellen will have three-month composite to review.

Interestingly, the report for February indicated that some 29,000 jobs at all levels of government were lost. The labor participation rate increased to 58 percent, the highest figure since October. In analyzing the unemployment rate reduction, one must not only consider the weather but also the booming number of retirees leaving the workplace as baby boomers move on.

Equities Rally, Dollar Softens

Equities recovered nicely after the disappointing payroll report. The dollar did not fare as well. Investors view the employment glitch as inconsistent with the strong growth in the last quarter of 2013.   

MSCI All-country index – Up 1.09 percent

MSCI Emerging Country Index – Up 0.89 percent

Dow Jones – Up 0.92 percent or 144.4 points to 15,772.99

S&P 500 – Up 1.17 percent or 20.67 points to 1,794.1

NASDAQ – Up 1.56 percent or 63.331 points to 4120.452

Forex pairs

Euro- USD – 1.3633

GPB – USD – 1.649

USD – Yen – 1.0233

USD – CAD – 1.1101

USD – Ruble –  34.7375

US Dollar Index – Down 0.26 percent to 80.694  

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Nervous Markets Await Fed and Employment

Nervous global markets anxiously await news from the US Federal Reserve and the new Labor Department unemployment data to be released on Friday. Improved data from Europe boosted European equity markets and raised the euro against the USD as the dollar regained footing against the yen.

Markets appear edgy about what Federal Reserve Chairman Ben Bernanke will announce regarding the possible tapering of the current stimulus. Most likely the news will be tempered at best. With unfavorable growth in GDP expected and with modest gains of about 185,000 new jobs expected, there simply is not enough impetus for the Fed to alter policy significantly, if at all. A gain of 185,000 jobs would trim unemployment to 7.5 percent, a step in the right direction but not a level likely to dissuade the Fed.

On Tuesday, US equities continued paring down but are poised to post record gains for the month. Eight of ten S&P 500 sectors declined for the day. All three major indices lost ground Tuesday. Yet, equities are ready to close the month with the sharpest gains since October, 2011. Early Wednesday trading indicated a rally in equities.

Also of interest to Wall Street is the successor to Chairman Bernanke. President Obama’s choice will likely influence markets with hawks boosting markets and selection of a dove bolstering the dollar.

The European Central Bank (ECB) is meeting this week and new forward guidance is expected from the ECB and from the Bank of England (BOE). The euro and the pound have strengthened in anticipation of new guidance and in response to encouraging data.

European equity markets closed flat for the day but the MSCI index of world stocks fell 0.5 percent.

Dollar Nervous

The dollar gained some strength overnight but slumped 0.5 percent against the yen on Tuesday to 97.93. Just last week, the dollar hit new highs against the yen. The dollar index briefly touched a five week low at 81.785.

Lee Hartman, a currency strategist with the bank of Tokyo explained; “The dollar faces a lot of key event risk in the week ahead with the release of the U.S. Q2 GDP report and the latest FOMC policy meeting on Wednesday, followed by the release of the U.S. employment report for July on Friday.”

The 10-year Treasury notes fell 3/32 with yields closing at 2.57 percent on Friday. Over the last two weeks, yields have ranged from a low of 2.l3 percent to a high of 2.63 percent, uncommon volatility. On July 8, 2013, yields hit 2.78 percent, a two-year high.

The German bund ended a comfortable bounce with a decline on Tuesday. Disappointing trade caused the decline.

Japan’s Nikkei touched a three-week low, sliding 3.3 percent. The stronger yen and poor data from Japan’s exporters hit equities unusually hard. The possibility of a new sales tax is weighing heavily on Japan’s economy.

Latin American Currencies

As the USD has strengthened and become more appealing to foreign investors seeking quality, Latin American currencies have suffered. As the Fed has considered tapering, Latin American currencies have fallen sharply over the past two weeks. A number of factors could continue to impact these currencies negatively in coming months.

Brazil’s industry index slumped to its lowest level in four years. The Brazilian real lost 0.4 percent on Tuesday on a sharp plunge in industry confidence.

  • The Mexican peso slid 0.6 percent to 12.7555 per USD, a two-week low.
  • The Chilean peso lost 0.7 percent to 511 USD, a one-month low.
  •  The Argentine peso shed 0.58 percent to 8.61 USD and has lost 21.25 percent this year.
  • The Mexican peso slid 0.6 percent to 12.7555 per USD, a two-week low
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US Equities Resist Good Jobs Numbers

The upward spike of US equities appears to have slowed despite good news from the employment sector. Beginning last Friday, the Dow Jones Industrial Index has flirted above the 14,000 threshold several times. Each climb above the benchmark has been met with disappointing resistance.

In January the DJ gained six percent. The Nasdaq and the S&P 500 also enjoyed substantial gains. However, the February marketplace is struggling to stabilize and has been marked by volatile swings.

Equity market analysts suggest that the volatility is an indication that stocks have peaked. Equity insiders, those investors holding stock inside the company to which they are employed, are reportedly selling shares. This indicates the belief by insiders that the value of their company’s stock are not sustainable.

While the bull market investors dominated January, the bears have gained a foothold in February. The Thursday morning jobless report posted good news for the economy that should have been welcomed by equity investors.

Initial claims for state unemployment benefits fell by 5,000. This amounts to a seasonally adjusted new claims application figure of 366,000. The volume of new applicants hit a five-year low.

However, analysts had expected even a bigger reduction in initial filings. An economist at Ameriprise, Russell Price, may have summarized the markets view of the figure; “The labor market is improving, but certainly not at a robust rate by any means.”

The employment report shows that the number of persons receiving unemployment benefits after week one climbed 8,000 for the week ending January 26, 2013. The four-week moving average for new claims dropped to 2,250 to 350,00, the lowest level since March 2008. Perhaps the biggest news is that several key, proposed layoffs were forestalled. This would indicate that the recovery, though paper thin, is progressing. A Labor Department spokesperson suggested that the volatility in January was subsiding.

Non-Farm Productivity

A non-farm productivity report covering the 4th quarter 2013 shows that non-farm productivity droppe3d to the lowest level in two years. This data comes on the heels of positive non-farm employment news during the quarter.

Analysts suggest the turbulent weather may be the cause of the low output. Non-farm productivity fell by 2 percent in the 4th quarter. Output rose by 0.1 percent. Hours worked increased by 2.2 percent.

This downturn could be attributed to the implementation of reduced spending by the Defense Department. The overall economy gave back 0.1 percent in the last three months of 2012. On the right side, hourly compensation rates increased by 2.4 percent in the quarter.


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US Equities Surge, Euro Gains

Fueled by encouraging news from the Department of Labor and the Commerce Department and the University of Michigan, the Dow Jones moved quickly above the 14,000 mark before retreating just below the benchmark. The S&P 500 gained 12.09 points and the Nasdaq Composite jumped 24.44 points in early morning trading.

The Labor Department produced its January Non-Farm Payroll report indicating that the US added 157,000 jobs in January. For December and November, 127,000 more jobs were created than initially reported. The unemployment rate rose to 7.9 percent, but the market responded positively to the December and November adjustments.

Sectors With Job Growth

  • Construction jobs +28,000
  • Retail +22,000
  • Healthcare +23,000
  • Manufacturing unchanged
  • Government -9,000

The average work week was stable at 34.4 hours per week. Personal income rose by $0.4 in January

The improved construction industry is keenly watched by analysts. Health care added 320,000 jobs in 2012. Manufacturing showed no new jobs in January. More than 2,170,000 jobs were created in 2012. In calendar year 2012, job growth averaged 181,000 per month.

The Institute For Supply Management (ISM) report was also encouraging. The ISM reports that PMI registered 53.1 percent, a significant jump from the 50.2 registered in December’s report. Manufacturing increased for the second consecutive month. New orders increased to 53.3 percent, an unexpected jump of 3.6 percent.

The ISM reports that 13 of the 18 manufacturing industries posted increases in January. The report may identify the surprising dip in GDP in the fourth quarter. Weather disasters, the fiscal cliff and uncertainty in the euro zone have weighed heavily on the economy. However a paring in defense spending may well be the major factor in lowering the GDP.

Housing prices are making some headway but, on the whole, the industry is mired in a deep slump and it is clear that young Americans are not determined to purchases homes.

The Euro Continues Gains

The euro continued its impressive rally rising to 1.3674USD, a level not visited since November 2011. The new close represents a 0.6 percent one-day gain.

Driving the euro was a better than expected Purchasing Managers’ Index. The January report showed more demand than at any time in 2012. Output in Germany was particularly strong.

The euro is still riding a high from the early three-year loan repayments. Despite down days in Spain, Greece and Italy, there is a new confidence in the euro zone. All major indices in the region were up except for the three laggards who registered another day of hard hits

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US Progresses, Euro Soars

A number of economic reports showed a positive trend for the recovering US economy while actions from the ECB raised the euro above the 1.35USD benchmark. The Labor Department reported that initial claims for unemployment last week rose by 38,000 to 368,000. This figure comes on the heels of a week where new claims were at their lowest level in five years. This figure was slightly above analyst’s projections but well within a range to suggest the paper-thin recovery had momentum.

Employment has been robust in January with 160,000 new jobs already filled. The total for December was 155,000.

Perhaps the most interesting and positive fact is the increase in personal income on December. The Commerce Department reported that personal income rose by 2.6 percent in December. This figure far surpassed the projected 0.8 percent gain.

However, much of this gain may be attributable to advance payments made by US corporations prior to December 31, the end of the tax year when Tax policy was unclear. Consumer spending fell just short of expectations rising by 0.2 percent.

Importantly, planned layoffs declined in December. This is the first decline in four months. December job cuts totaled 32,556, a sharp decline from November’s 57,081 job cuts, a 41 percent improvement.

Euro Continues Surge Against Dollar

The euro continued an impressive upward trend against the dollar as the European Central Bank (ECB) said that 137 billion euros would be repaid to the bank on the earliest due date. These payments are in the bank’s three-year loan program.

President Mario Draghi’s aggressive three-year loan program is credited with stabilizing the banking and credit crisis in the euro zone. The ECB will announce its second payment date on Friday. This will allow banks to properly assess their capital needs and liquidity.

The move to repay suggests that the borrowing banks have stabilized and that they have sufficient liquidity to meet their operating costs. The repayment is likely to be interpreted as an endorsement for higher interest rate, a consideration the ECB will likely determined after the next tranche.

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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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ECB and Non-Farm Payroll Boost Euro

Momentum from Mario Draghi’s announcement regarding the ECB’s upcoming bond buying spree helped take the euro to four month highs against the dollar. A weaker than expected Non-Farm Payroll Report neutralized US equities and sent the dollar lower. The Labor Department’s report fell far short of ADP data submitted Thursday and below analyst expectations.

The economy generated 96,000 new private sector jobs in August. The projected number of new jobs was 125,000.  ADP had indicated the addition of 225,000 jobs by the private sector in August. Number of hours worked was also down. New claims for weekly benefits fell to the lowest level in a month.

The upbeat focus yesterday was dimmed on Friday but many investors feel the most recent job report gives credence to the need for QE3. The Federal Open Market Committee will hold a two-day meeting starting on Wednesday. The likelihood of new stimulus will be the featured topic. Investors believe that the program could be announced as early as Thursday.  QE3 is a highly controversial package.  The stimulus will weaken the dollar, boost equity markets and may not have enough clout to influence the overall economy.

The euro climbed to $1.2806 before settling at $1.2782 at midday. The USD fell to 80.263 against a basket of currencies. European equities continued to rise as the FTSEurofirst 300 rose to 1105.73. Yield on the 10-year US bond was up the 1.6215 percent.

In the wake of Draghi’s announcement, both the yields on Spanish and Italian debt hit 4-month lows as gold futures climbed to $1,737.30, another four-month high.

In the euro zone, a critical decision from Germany’s high court regarding the legality of the Bailout funds for euro zone members will be announced next week. Experts predict the court will vote to support the release of much needed funds but it is remain a hot topic of debate in the homeland. Germany was the lone dissenting nation in the ECB’s vote for unlimited bond buying.

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Euro And US Employment Spark Investors

Mario Draghi’s newest announcement regarding the European Central Bank’s (ECB) intention to purchase unlimited amounts of euro zone bonds combined with a solid employment report from ADP raised equity markets to highs not seen since 2008. There is much work to do but the trend on both the euro zone and US fronts gave investors renewed confidence and sent stocks soaring to the highest levels since the collapse of Lehman Brothers. Three fourths of equities on the New York Stock Exchange rose in value on a day of heavy activity.

For the year, US equity markets have risen by double digits. The dollar has held firm as the euro has fluctuated violently over the past nine months. The ADP employment report indicates that private employers added more than 200,000 jobs in August. The Labor Department will release its August data tomorrow.  On occasion the ADP report has varied greatly from the Labor Department’s Non-Farm Payroll Report.

If the payroll figures are correct it would be a shot in the arm for the economy and for President Obama, who is fighting for his political life. After low investor activity in August, investors came out of their shells today.

ECB President Draghi started the ball rolling by unveiling a new initiative to purchase debt-ridden countries with unlimited purchases of national debt. To add appeal for investors, Draghi also proclaimed that the ECB would not initiate its senior position if the countries were to default. This position both angered and frustrated investors during the paring of Greece’s national debt.

Draghi said that the ECB’s commitment should ease investor’s “unfounded” fears about the future of the euro. Only one member of the ECB’s governing body dissented Draghi’s proposal. The dissenting vote is believed to have come from Germany where the Bundesbank has been critical of Draghi’s concept.

However, there is undeniable evidence that euro zone debt has affected every euro zone nation’s economy, including new evidence suggesting that the region’s poster child, Germany, is suffering a downturn. Investors seem more interested in stabilizing the euro than seeing a quick reversal of form.

For the ECB to begin purchases, the country must apply for bailout funding. This means complying with austerity cuts designed by the euro zone allies. Spain is in desperate need of funds but President Rajoy would not commit to applying for further aide. Like other political leaders, the required austerity measures are seen as a strong deterrent to growth or even stabilization.

Despite the positive news, bond sales in France and Germany were not fully subscribed. This could well be a reflection of what could be the biggest economic challenge for the next two or three years. That is a slowdown in manufacturing and consumer demand in China, which is bad news for global investors. Investors believe that another round of easing may be forthcoming in the globe’s second largest economy.


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US and Euro Unemployment Hit Markets Hard

The one-two punch of dismal euro zone unemployment figures released on Thursday followed by a disappointing US non-farm payroll report on Friday sent global equity markets, commodity markets and the euro into a downward spiral with momentum. Combining the slow job growth with equally disappointing manufacturing data pressured markets as the UK and China announced another round of quantitative easing.

Only 80 thousand jobs were created in June and May’s new jobs were trimmed to 77,000. While it is not believed that the Federal Reserve will acquiesce to a 3rd round of quantitative easing, there exists more than enough data to prove the economy is at a standstill.  At the root of the slowdown, is the debt crisis in the euro zone where there are no significant initiatives to stabilize the region.

After Friday’s Labor Department non-farm payroll report, the Dow Jones, Nasdaq and the S&P all lost ground.  The DJIA shed 124.2 points or 0.96 percent settling At 12, 772.47. Nasdaq lost 38.79 (1.30 percent) to 2,937.33. The S&P fell 0.94 percent to 1,354.68.

As the payroll report rippled through Europe, equities turned sharply down. The FTSEurofirst 300 index fell 1 percent to 1,033.77 in the worst day of trading in two weeks. The ripple effect sent Spain’s borrowing costs above the unsustainable 7 percent level. US 10-year treasuries rose to 1.541 percent, the lowest rate since early June. The two-year German bond settled in the negative for the first time in the country’s history.

Commodity markets also turned down as the need for raw materials slowed. Oil prices dipped 3 percent as copper fell 2 percent and gold dipped 1 percent.

Following the ECB’s lowering of interest rates on Thursday, the euro slumped to $1.2296 USD, a two-year low.

Despite the overall weakness in job growth, there were some positives in the payroll report.

  • Temporary jobs increased more than in the previous three months.
  •  Average hourly wages increases six cents.
  •  Number of hours worked rose to its highest level since November 2008.
  •  Household labor increased to its highest level in 2012.

Upon a close look, the payroll report showed a consistent trend. Private employers added 84,000 jobs but the public sector lost 4,000 jobs. The public sector is trimming budgets and jobs. As the attached chart reflects, since January 2010 government has shed 536,000 jobs. During that time, the private sector has created 4.3 million jobs. In most cases, private sector jobs do not provide the benefits that the private sector offers. In the tiresome political theater that is holding the economy and entrepreneurs hostage, the federal government has shrunk by 612,000 persons since President Obama took office. That shakes out to be a savings of $30 billion per year.

The Obama administration has proposed much-needed infrastructure sending to boost employment. This would raise private sector employment.  However, if the public sector slows job trimming, government will no longer negate the payroll report.

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Unemployment Rate Disappoints

Once again, the ADP Payroll number runs counter to the Department of Labor’s Non-Farm Payroll Report.  The optimistic ADP employment numbers were released on Thursday but today’s Labor Department Non-Farm Payroll report indicates that the private sector added 120,000 new jobs in the month of March.  The Labor Department data indicates 100,000 fewer jobs than the ADP survey.

Despite the disappointing news, the unemployment rate fell 8.2 percent, the lowest rate since 2009.  New jobs created in March settled at the lowest level since October 2011.  The reduction is attributed to the fact that unemployment benefits have expired for a vast number of workers and that a number of persons have stopped looking for work.

Earlier in the week, Fed Chairman Ben Bernanke commented that the recent successes in job creation would be difficult to sustain.  Bernanke had previously predicted that GDP growth would slow in the first quarter to an annually adjusted rate of 2 percent compared to the 3 percent rate enjoyed in the 4th quarter of 2011.

The disappointing employment numbers lend credence to speculation that the Federal Reserve is considering another round of stimulus spending. Bernanke continues to warn those who listen that the US recovery is on fragile footing. One standard that the Fed seems to use is job creation.  In a one-month cycle, Bernanke would like to see 300,000 jobs created.

There is speculation that the February employment gains were fueled by seasonal workers returning to the work force due to the warm winter weather.  However, the most encouraging component is that the manufacturing sector added 37,000 jobs.

Canada Employment Surges

While US employment figures teeter, 82,000 Canadians returned to work in March.  To understand the magnitude of this employment surge, analysts had projected the addition of just 10,000 jobs in March.  For the past six months, job growth in Canada had been flat.  However, the Canadian workforce had already returned to pre-recession strength.

Canadian unemployment dropped from 7.4 percent to 7.2 percent.  The Canadian jobs report stabilized the Canadian dollar against the USD.  The Canadian dollar settled at C$0.9938 against the dollar.  The number of investors flocking to the Canadian currency led to a 0.4 percent lift before the Easter weekend.

The numbers may well justify a Canadian interest rate increase in the third quarter of 2012.  If The Bank of Canada raises interest rates, the Canadian dollar will increase immediately.

Over recent months, the Canadian dollar has been a model of stability, never increasing or decreasing by more than $0.02.  The Canadian economy would suffer if the economic conditions in China or North America worsen.

The 2-year Canadian bond settled at 1.259 percent while the ten-year climbed 2 cents to 2.128 percent.  Canada’s good fortune seemed to positively impact the SD more than its own currency.        

The Euro

On Thursday, the euro fell to 3-week lows against the USD.  News from Greece never fails to impact the euro and with Spain in treacherous waters euro anxiety continues.  The Swiss National Bank is expected to initiate actions designed to pare the Swiss franc against the euro.  During the week, the euro fell 0.6 percent against the dollar.

Broad selling of the euro saw the currency dip below the 1.2 Swiss franc level for the first time since the Swiss National Bank established the 1.20 level as a cap in September 2011. The euro fell to 1.192 francs.

The plight of Spain will most likely cause the European Central Bank (ECB) to re-enter the investment market.  The action plan will be expected to stabilize the Spanish bond market.

Spain is the euro zone’s 4th largest economy.  The region’s 3rd largest economy is Italy, now run by technocrat Mario Monti.

To add to the euro worries, Greece is pressuring Greek bank shareholders to post billions of euros to re-capitalize the state.  April 20th is the target date for the contributions.  Failing to raise the necessary funds, it is probable that the state will nationalize the banks; not exactly the remedy investors have in mind.

In 2011, Greek bank shares have trimmed by 77 percent.  The banks are calling for 3.5 percent interest on any investments in the state.  Importantly, there “investor exhaustion” is a coined term that best decides the Greek debt.  And, everything about Greece remains exhausting.  Unfortunately, the handling of Greece and the strong possibility that another euro zone member may be falling by the wayside has signaled a retreat for investors.

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