GBR Market Wrap, June 3, 2011
In this Week’s Issue
• Moody’s sounds alarm over U.S. debt limit and deficits (Reuters)
• U.S. Dollar at yet another record low against Swiss Franc on Friday
• U.S. economy ads just 54,000 jobs as unemployment rises to 9.1% (FT)
• Brazil’s economy reported annual growth of 4.2% in Q1 of 2011 (Economy.com)
• Moody’s cut Greece’s credit rating by three notches to Caa1 from B1 (FT)
• Euro area annual inflation is expected to be 2.7% in May 2011 (Eurostat)
• The yield on the 10-year Treasury sank below 3% for the first time this year (AP)
• The Euro area seasonally-adjusted unemployment rate was 9.9% in April (Eurostat)
• U.S. consumer confidence index fell to 60.8 from a revised 66 in April (AP)
• India’s economic growth rate slowed again to 7.8% in Q1 of 2011 (Economist)
• U.S. home prices declined by 4.2% Q1 of 2011; lowest point since 2006 bust (AP)
Friday’s employment report was a bit sobering. The U.S. economy was only able to create 54,000 new jobs, much less than the roughly 150,000 expected by economists. This is aggravated by the fact that the U.S. economy needs to add at least 100,000 new jobs each month just to keep up with the demographic trends of a steadily growing population. In real terms then, the U.S. economy actually lost about 50,000 jobs last month and that is of course disconcerting for the financial markets as well as the viability of an economic recovery already standing on rater shaky legs.
The chart below compares the job losses during the most recent recession with those of prior periods. Technically, the economic recession has been over for quite some time now. However, the employment recession still lingers on. The possibility of double-dip recession is very much dependent on the outlook for jobs. Let us hope that the slow but steady trend in this chart continues to improve.
Please consider John Drzik’s guest column in the Financial Times: Price volatility is here to stay.
Here we are again with a short technical outlook on the markets. One day before the all important U.S. jobs report, Jeff Macke made a very good call when he suggested: “Brace yourself and if you are nervous about the markets, sell until you can sleep! “
Indeed, you had to brace yourself when U.S. equities nose-dived after a less than favorable jobs report on Friday. As John Drzik’s article above suggested, price volatility is here to stay. This is true not just for commodities but also for equities. Trading of shares, particularly individual stocks, continues to show signs of commodity-like price behavior. Brace yourself or better yet, wear a seat-belt when navigating the financial markets.
Good luck and good investing!
Clemens Kownatzki, MBA is an adjunct professor of financial risk management at the Graziadio School of Business and Management, as well as the founder and CEO of FX Investment Strategies, a Registered Investment Advisor. In addition to running his investment advisory firm, he is a contributing author at SeekingAlpha.com and BusinessInsider.com. He also authored the book, Money Music 101, available on Amazon and Kindle, in addition to publishing the popular investment blog www.fxinvestmentstrategies.com along with a weekly newsletter.
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