Notes From Underground: The Aussie unemployment number is a blowout (anything but Greece)

Tonight we saw a very robust number from the Aussie government. The consensus number for job creation was 15,000, while the actual number was 52,700–unemployed both full and part time. The unemployment rate was projected to be 5.6% and that actual number was 5.3%. The AUSSIE DOLLAR has been bid against all currencies as the market is now again predicting that the RBA will raise rates faster than expected. The Aussie stock market has rallied while the bonds have been sold. This unemployment number gives hope to the global growth perspective and will give way to more robust equity markets.

It is interesting how big the miss was on the market’s conjecture when the last miss was just the opposite on the KIWI unemployment number.We recall that New Zealand was looking for a rate of 6.5% when the actual number came in at 7.3% with substantial job loses, not gains. We have to wonder how two economies so closely tied to the Asian story could have such drastically different results. While we are happy to see the AUSSIE numbers, the divergence of these two key data points prevents us from irrational exuberance about the AUSSIE. We will trade according to market action, but we will be attuned to further confirmation to the Australian economic data.

Rumors persist tonight about a plan that Germany /France have agreed to some type of funding package to relieve the immediate strain on the European debt markets. At the close of European markets, the German/Greek 10-year spread narrowed to 295 from 340 basis points yesterday. The EURO was also stronger as the risk trades were being bought again. Again, this is merely rumor so it could unwind as soon as some European minister decides she needs to practice her oratorical skills. Some are pointing to a possible IMF package, but we are skeptical that Sarkozy would allow the IMF to take center stage. The current head of the IMF, Dominique Strauss Kahn, is a prominent and powerful French politician who was given the position to remove him from the French spotlight. The IMF has been a good place to move prominent politicos to so they can do there work in the emerging world and not grab the political limelight at home. There is vibrant talk that Strauss-Kahn is looking to run against Sarkozy in 2012, so the current French President will not be looking to enhance a possible contender’s profile in any type of bailout. Sarkozy is going to have to deal with the Germans and he will have to meet whatever price the Germans exact for their pound of flesh.

We have yet to hear from Chancellor Merkle but if the deal includes Axel Weber becoming the ECB President, the short EURO positions are going to get a spanking. German hard-money advocates such as Weber make the Bernanke Fed look like Leninist currency debasers. Who will prevail here? Again, the economic die has been cast. It is now the political arena that has the deciding vote. Sarkozy is truly caught as he does not really wish for the Germans to be given such a strong hand over European money, but at this juncture he has little choice. Sarkozy can allow his potential adversary to gain ascendence in a time of crisis, or hand over monetary control to the hard money volk .Our new little Napoleon we await your decision: the lady or the tiger?

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4 Responses to “Notes From Underground: The Aussie unemployment number is a blowout (anything but Greece)”

  1. Fred Ehrman Says:

    “The Aussie stock market has rallied while the bonds have been sold. This unemployment number gives hope to the global growth perspective and will give way to more robust equity markets.”

    Do you believe the Aussie job report, in an economy that is largely resource based with a good balance sheet, can be a harbinger of blooming crocuses in regards to Europe and the US, whose economies are faltering and whose balance sheets are debt- ridden?
    Seems to me the Aussie/Euro hedge is a good long term bet. That doesn’t preclude short term robust equity markets where liquidity seeks outlets.

  2. yra Says:

    Good point Fred—but as the Aussie has shown us the markets have been anticipating the Aussie economy rolling over in anticipation of a global slowdown and yet job growth in aussie won’t stop —-something is out of sync and that is why the divergenve between the aussie and kiwi numbers caught our eye.The aussie dollar ahd been one of the markets shorts up to now so we watch this barometer of global growth and especially asia

  3. Mister Kowalski Says:

    There was an EU summit which accomplished absolutely nothing concrete. Greece is supposedly in consultations with the IMF, and well they should be.. after the summit’s statement, the Euro dropped and the rates on Greek bonds went up, but not badly. “Euro area member states will take determined and co-ordinated action, if needed, to safeguard financial stability in the euro area as a whole. The Greek government has not requested any financial support” it read. Look for the speculators to resume their attacks tomorrow. If this was happening to Michigan, Bernanke would’ve forcefully squashed this bug long ago. This aggressiveness is a big reason why these speculators don’t attack California and Michigan as they do Greece. I give it two weeks before Greece cries for mercy, and by the time they do, someone else will be in trouble.. Portugal most likely.

  4. Jeff Says:

    Merkel shows her hand and the French are ticked.

    Classic quote, “Germany cannot justify its taxpayerers to finance the lovely lives of the Greeks.”

    Should we buy puts on the entire EU?

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