New claims for unemployment benefits rose more than expected during the first week of January climbing by 24,000 to 399,000 for the week. Projections called for 375,000 new applications.
While the surge makes it clear that the U.S. labor market remains volatile, January is typically slower and leads to an increase in layoffs as temporary workers hired for the busy holiday season are no longer needed.
“There is usually a surge in seasonal layoffs at this time, and that is what’s happening here,” said Jonathan Basile, a senior economist at Credit Suisse in New York. “Claims have shown an improving trend. It’s a vote of confidence for continued improvement in the labor market.”
Source: Bloomberg
The Swiss central bank imposed a ceiling on the franc’s exchange rate for the first time in more than three decades and pledged to defend the target with the “utmost determination.”
The Swiss National Bank is “aiming for a substantial and sustained weakening of the franc,” the Zurich-based bank said in an e-mailed statement today. “With immediate effect, it will no longer tolerate a euro-franc exchange rate below the minimum rate of 1.20 francs” and “is prepared to buy foreign currency in unlimited quantities.”
The franc has surged to records against the euro and the dollar, hurting exports and eroding economic growth. While the SNB last month boosted liquidity to the money market and lowered borrowing costs to zero, investor concern that governments may struggle to contain Europe’s worsening debt crisis has continued to push the currency higher.
“The SNB has committed itself to creating unlimited amounts of francs and selling them versus the euro to defend the currency’s level,” said Fabian Heller, an economist at Credit Suisse Group AG in Zurich. “They will follow through on their commitment as otherwise their credibility would be clearly damaged and speculation would start again, most likely leading to renewed franc gains.”
Bloomberg
A widening of spreads on dollar bonds issued by developers could signal the imminent bursting of China’s property bubble. These bonds have been the worst performing of all US-denominated, non-financial, Asian corporate debt, and are now at a 2.26 percent premium to US Treasuries. This is a clear sign that investors are demanding greater yields to lend to China property firms, as they expect borrowers will have a harder time meeting debt payments amid a government clampdown down on lending.
As a result, Goldman Sachs Group Inc. and Credit Suisse Group AG cut their profit estimates for Chinese real estate companies after a 12.8 percent jump in real estate prices in April from a year earlier spurred the state to increase regulation.
“New issues by Chinese developers will stall for the time being,” Vince Chan, the Hong Kong-based chief credit strategist with Amias Berman & Co. LLP, said in a phone interview. “Investors need handsome rewards for getting exposed to weaker fundamentals.”
Source: Bloomberg
