If you are one of the initial 450K who filed a jobless claim this week, or among the same number that has filed for the last 6 months, you might be considered a loser from an economic perspective. If you are a sales manager from Caterpillar (CAT), a maker of industrial equipment, you might be considered a winner. And if you are a Wall St. banker, trader, investor, you are definitely considered a winner.
Thus continues the growing divide between Main St. and Wall St., buoyed by politicians in Washington who have attempted to use class warfare to maintain their cushy lifestyles as elected officials. Don’t be fooled folks, there are economic policies that can put people back to work in this country; unfortunately they are not being pursued. The logic is that as someone who is unemployed, you will not vote to bite the hand that feeds you (government). Resist that urge come November.
Clearly I am talking about the jobless claims numbers that came out here in the US, which have more or less become an afterthought. It’s just assumed that 450K new jobless claims is the “new normal” give or take a few K. Meanwhile, US corporate earnings are coming in better than expected, mostly on declining revenues (thanks to job cuts!) and weak Dollars (inflation and purchasing power be damned!).
Yet no one is hiring. Later this morning we will get the Philly Fed and the US Leading Indicators which are bound to show a weakening economic picture. In this regard, there are no winners and we are all losers.
Well, if we’re all losing, who’s winning? The answer of course is China, who reported slightly lower than expected quarterly GDP growth of 9.6%, with inflation rising at the fastest pace in nearly 2 years. Think their currency is under-valued? Nah.
Up north in Canada, leading indicators came in worse than expected, posting a .1% loss vs. an expected gain of .2%.
In the UK, retail sales figures came in worse than expected but EU PMI figures came in better than expected, high-lighting the shift in sentiment between the two regions.
So this morning is a bit of a mixed bag, as the markets don’t know what to make of all this.
In the forex market:
Aussie (AUD): The Aussie is lower as Chinese inflation has picked up making a case for China to attempt to put the brakes on economic expansion. As the leading market for Australian exports, a Chinese slow-down could be perceived as Aussie-negative. However, even if Chinese GDP declined by 50%, it would still be twice as much as what every other industrialized nation is praying for. So don’t count out the Aussie just yet.
Kiwi (NZD): The Kiwi is lower for the same reasons as the Aussie, though compounding its losses is a report that consumer confidence in NZ has fallen to a 14-month low. Combined with a sales-tax increase, domestic demand has slowed which has slowed economic recovery.
Loonie (CAD): The Loonie is mostly lower as Canada’s index of leading indicators fell for the first time in nearly 18 months, lead by a decline in manufacturing and housing. The index fell .1% vs. an expectation of a gain of .2%. (Click chart to enlarge)
Euro (EUR): The Euro is higher as Euro zone PMI figures came in better than expected led by German growth. Meanwhile riots are happening in France, though I’m not sure if they are due to a raise in the retirement age of the cancellation of the Lady Gaga concert. Perhaps a little of both.
Pound (GBP): The Pound is lower as retail sales figures came in lower than expected. In addition, Chancellor Osborne said that he is counting on the BOE to pick up any slack in the economy that may occur from the austerity measures by providing further monetary easing. (Click chart to enlarge)
Dollar (USD): The Dollar is mixed today as the market appears to be driven more by the fundamentals and less by risk themes. Secretary Geithner came out and tried to jaw-bone the Dollar higher by claiming that there is not a “need” for the Dollar to decline further. Surprising that he would basically admit that they have been pursuing a weak Dollar policy, despite the rhetoric to the contrary.
Yen (JPY): The Yen is slightly higher though taking a break against the Dollar as the market appears to want to go back into risk-taking mode. Fears of a Chinese slowdown are overblown, and stocks appear to be gaining around the globe.
So there are some definite winners and losers out there. Apparently at the G-20 this weekend they will pledge to refrain from “competitive devaluation” of their respective currencies, so the global recovery could get interesting going forward. Provided of course that everyone sticks to their pledge.
But does this mean that QE2 is off of the table here in the US? Not necessarily. While technically a form of currency manipulation, it is not a direct government action so it may get a pass. So all in all this weekend’s meeting should be a non-event.
Unless of course China decides to share the wealth by fast-tracking Yuan gains, though we might see monkeys fly before that happens. And unless we get a change in economic policy here in the US, we will all continue to be economic losers.
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