Perhaps the main point to take to heart from the events of the last week is the way the recent ECB liquidity measures have apparently been able to stabilise the debt crisis, at least for the time being, even while it is not clear that they will have the same success stabilising the deterioration in the respective real economies.
Tag: economic data
The US dollar is trading within the ranges that were seen prior to the weekend as the market awaits fresh developments. The market remains apprehensive as additional rating fallout is expected, ahead of a resumption of Greek PSI talks and this week’s European sovereign supply (estimated 17 bln euros of bonds).
The myth that Greeks are lazy and Germans are industrious and that this has some significance in the sovereign debt crisis is everywhere one turns. It is false. The issues for Greece are not about working longer hours but are ones of productivity, industrial organisation, and demographics. That won’t stop people from spinning the tales of lazy Greeks and workaholic Germans.
I thought I would flag this for paid members. The jobless claims data for the last week came out and it jumped fairly significantly from 375,000 to 399,000. It had been in the 375,000 range for a number of weeks prior.
The eurozone is in a recession right now. And it is the banking sector where downside risk lies. Will the US also double dip? What about China’s faltering housing and stock markets?
The euro was recovering in early Europe, moving back toward the upper end of its recent narrow range and it reversed course sharply, triggering stops along the way as it dropped nearly a cent to $1.2695. The technical failure yesterday at $1.2820 may also have been more telling. News from the German stats office that its economy may have contracted 0.25% quarter-over-quarter in Q4 is a bit disappointing as some hoped for stagnation.
Late yesterday the US reported the biggest jump in consumer credit in a decade. It reinforces the signal of the gradual healing of the labor market and the resilience of the US consumer. The report increases the risk that the November personal consumption expenditures are revised higher from the initial 0.1% estimate.
The light news stream, adequate bill auction receptions and comments from Fitch suggesting France’s AAA rating is secure this year encouraged short-term players to take profits. However, sentiment is still wholly euro negative and a large investment bank was out today with new calls to sell the euro. Resolution of credit watch decisions are still awaited from Moody’s and S&P. Separately France defied expectations and contradicted poor PMI readings by posting a 1.1% jump in November industrial output. The consensus was for a 0.1-0.2% gain.
Here is something to flag; there has been a lot of chatter amongst economic pundits about the seasonality effect on recent data. Those with a sceptical view have been saying that the upside surprise in the Friday jobs data in particular is the result of seasonal factors. Here are two examples.
In a Tokyo-less Asian session the dollar had begun the week bid, but this quickly reversed in early Europe, which saw the euro rise more than a cent off the $1.2666 low. It was largely a short-covering bounce, but as North American players take their posts, it is running out of steam, unable to take out the $1.28 level and trigger another round of short covering. Sentiment toward the single currency is still overwhelmingly bearish, but seems to be a growing sense that it may have come too far too fast.
Here’s what I had to say about Europe on Capital Account with Lauren Lyster on Thursday night. I’m not bullish on the real economy there (but I still expect relative share outperformance due to lower P/Es). The US is having a bit of a data surge to the upside: housing, employment, manufacturing, all of these numbers have been better of late.
The US is a continental country, meaning that its economy is mostly domestic with only a small percentage coming from outside via trade. That makes the US much less beholden to external demand than countries like Germany that are export-led. That said, I still see the odds of a recession in 2012 as high given the global backdrop