The central banks were in play today and while the Bank of England held to its present course, the Bank of Japan declared that they were now in full battle gear and announced a very aggressive monetary policy agenda. I was surprised by the tenacity of the announced program and certainly by its timing. The recent movements in the YEN, and,especially the EUR/YEN crossrate meant that the BOJ and the Japanese Finance Ministry had some breathing space to allow some of the ill effects of the Cypriot crisis to calm. No such by the BOJ as they “damned the torpedoes and announced full speed ahead.” If other central banks wish to muddle about that is their business but the Japanese are determined to end the deflation that has plagued their economy. The steps that the BOJ announced, which had the greatest impact on the YEN and the Nikkei were:
Posts Tagged ‘nonfarm payrolls’
Notes From Underground: The Fed’s Zero Rate, Quantitative Easing Policies Are Stock Market FundamentalsMarch 10, 2013
The continued parade of stock market analysts who proclaim the equity market is rallying merely on Fed monetary policy instead of market fundamentals have spent far too much time doing case studies and not reading economic history. Interest rates as the variable signaling the cost of money are a very critical element and a key fundamental of the economy and especially the equity markets. U.S. multinational corporations are sitting on record piles of cash and also reporting strong profits. Much of the growth in profits can be attributed to two factors: Very low borrowing costs and continued pressure on wages. The FED has created the low interest rates and has hoped that the profitability resulting from low borrowing costs would bleed into higher wages and thus the need for increased hiring. The problem is many fold on the lack of success in aiding jobs creation. Globalization has kept pressure off wages and the deleveraging of the private balance sheets has meant that downward pressure remains on demand.
Notes From Underground: Friday Is the All-Important U.S. Employment Data, But Why Was European Employment Glossed Over?March 7, 2013
The February jobs data has been compiled and is now ready for public consumption. The consensus is for 165,000 (revised upward from 160,000) nonfarm payroll jobs being added and the rate to hold steady at 7.9%. This may be a difficult number to trade because the equity markets have already sloughed off so much negative news to keep the rally in tact–Italian elections, sequestration and economic malaise throughout Europe. The weekly jobless claims numbers have surprised on the downside during the last few weeks so a 200,000 NFP number would not be a surprise. It will be more important to watch average hourly earnings and the length of the work week–earnings are expected to be up by 0.2% per hour.
Notes From Underground: Not Quite Groundhog Day, But It’s Time for the Unemployment Report to See Its ShadowJanuary 31, 2013
Will it be another mediocre report or will the economy show signs of life after the “fiscal cliff” issue was pushed down the halls of Congress? The robustness of the equity markets would certainly make one presume the jobs data “ought” to be better, but my readers are well aware that its ultra low interest rates that put the continued bid to global stocks. In fact, low wage growth and low interest rates have been a dynamic duo for corporate profits as high unemployment continues to keep downward pressure on wages and, of course, corporations are borrowing massive amounts of money through bond offerings and bypassing the need for bank financing. The recent GDP release showed that wages and bonuses had a large increase in the fourth quarter but that was due to businesses bringing dividends and bonuses forward to 2012 so as to beat the tax increases in the new year.
Due to the availability of virility enhancers, the Italian political arena is plagued by billionaires who still believe they remain relevant. The ability to sustain an erection does not make you politically astute. Today’s effort by Silvio Berlusconi to undermine the Monti government led to a selloff in the Italian debt markets which caused 10-year rates to rise 13 basis points. Mr. Berlusconi didn’t want to bring the present government down but merely wanted to exhibit his relevance to the Italian political establishment. What the Greek debt problems couldn’t do, a 76-year-old man with a bottle of Viagra was able to accomplish. Elections are going to be held soon and the Monti coalition will be called to account. Now with all the problems confronting the peripheral governments the attempts of a disgraced former prime minister to prove his manhood is just an exhibition of the absurd. Pay no attention to the man with unnatural bulge in his ego.
Ah, the November 1 and the equity market regained its footing from yesterday’s post-Sandy house cleaning. The NASDAQ 100 recovered to close back above the midweek break below the 200-day moving average (2659) and closed in full rally mode. Supporting the NASDAQ action was the S&P/U.S. BOND RATIO, which gives a picture of interest rates to equity prices, also tested its key moving average and held after a short breach. It is amazing how many markets have reverted back to the 200-day m.a. in the last two weeks, which is a sign of health for the market as so many different trading instruments have been technically overextended–reversion to some established mean is a sign of health. Now that so many variables have reverted the market is set up to reveal some coming story. I am not sure of the tale but it is a signal to be alert for some approaching volatile price action.
The tweet heard ’round the world is as meaningless as most of the other rubbish that passes for political discourse in the Grand Republic. It seems that Jim Cramer had it right from the beginning for traders and investors. The only thing that matters is how the markets accept the jobs data and what will its impact be on asset prices going forward. The market is definitely in the mindset of weighing the data in a “more good is good and bad is bad” mode.
Tomorrow is UNEMPLOYMENT FRIDAY and the markets are geared up for headline driven action. The U.S. jobs report is expected to be 145,000 nonfarm payrolls and a rate of 8.2%, no change in the length of the work week at 34.4 hours and average hourly earnings rising 0.2%. The most significant data points will be manufacturing and construction jobs. Last month’s manufacturing jobs growth was weak and an increase is needed to put a more positive flavor to the report. I bring up construction jobs only because the HOUSING STOCK PRICES have risen dramatically and if homebuilders are increasing their work load then construction employment ought to be increasing–just looking for some synthesis between the real economy and stocks.
Friday’s unemployment report solidified the TRIFECTA of LIQUIDITY for the week. ECB President Draghi seeded the “liquidity clouds” at Thursday’s press conference by announcing the installation of the OTM (outright monetary transaction), which will allow the ECB/ESM to purchase unlimited amounts of sovereign debt of up to three-year duration–of course with conditions for those asking for help. Draghi is hoping to buy the whole EU project enough time so that a FISCAL UNION CAN BE FORMED WITH THE ABILITY FOR THE EU TO ISSUE A TRUE EUROBOND.
As I covered in NOTES yesterday, the three-ring circus was coming to town Thursday and the show was so fantastic that it dazzled investors worldwide. The RIKSBANK began the show by cutting its rate by 25 basis points to get the audience in a festive mood. Mervyn the Magnificent from the Bank of England did his laying down and going limp act so as not to be sawed in half by the by those magicians of the slight of hand. The BOE left everything as is and presented a very benign statement that offered up very little as to its rationale for maintaining the present rates as well as the same ASSET BUYING PROGRAM. The market was gawking at the rising financials in Europe when in the center ring, Marvelous Mario dropped his cape and headed out on the high wire in which the safety net was pretended to be removed or was totally transparent.