The U.S. jobs report provided great support to the bears on Wall Street as the 54,000 nonfarm payroll number led to a sell off in the DOLLAR and another drop in the Dow, S&Ps and all other equity indexes. For all the equity down/dollar up analysts, last week was a breakdown of that temporary correlation. U.S. equities were down more than 2% for the week while the EURO was up 2.5%. It seems that the global financial community is becoming more concerned about a softening U.S. economy and what it will mean for the budget discussions and FED policy.
The Financial Times has an article in Monday’s edition in which we learn the name of the BLS-COMMISSIONER–Keith Hall—as he cites that the recent UNEMPLOYMENT REPORT signifies “a general weakening in job growth.” It is rare when the faceless bureaucrats of data aggregation are interviewed in the public press and it reveals the great concern that is rising about the unexpected softening in the U.S. economy.
Soon we should be reading and hearing about the FED changing course on its liquidity removal plans. The markets will be on guard to a new “JACKSON HOLE” effort by the Bernanke FED to raise the wealth effect and portfolio balance channel to prevent a total downturn in the U.S. economy. Will the DOLLAR become the next tool in the FED‘s effort to breathe life into an increasingly moribund economy?
Yes, one bad number does not an economy make, but the UNEMPLOYMENT number seemed to give credence to the recent weakness in all housing and PMI numbers. The BONDS and NOTES were telling the other markets that all is not well in the economy. The problem seemed to be that very few were listening.
Tonight’s news is that the socialists in Portugal went down to electoral defeat as the CENTER-RIGHT Social Democrats attained 39% of the vote and will be able to form a government with the POPULAR PARTY and control the needed seats. The POPULAR PARTY is a “rightist” party and is expected to provide their 24 seats to the Social Democrats 105 seats for the needed majority. The Washington Post opined that the Center-Right coalition would push for the needed austerity policies to placate the political domos in Brussels. I disagree with WAPO that the outcome for austerity is to be so readily conceded by the Social Democrats.
American media seem to believe that the label of “political right” automatically assumes austerity. In Europe, the politicians on the right have been those most opposed to bending to the immediate concerns of the TROIKA—ECB, IMF, and EU. The populism from the right in Europe has been directed against allowing the needs of large French and German Banks to supersede the economic needs of the debt stressed sovereigns. Be careful and alert to how the mainstream media reports on the elections in Europe.
Following up on last week’s piece on the IMF I want to point out a piece by Simon Johnson. The gist of the article warns against the French gaining control of the IMF as it will cost its financial contributors. Professor Johnson is a former chief economist for the IMF so his thoughts are more than journalistic speculation. Control of the IMF by the French, especially the minion Christine Lagarde for President Sarkozy. The French are running a political campaign for Lagarde, but the nations of the world should be cautious in anointing the French finance minister without considering all the ramifications.
Again, I propose Trevor Manuel for the job but more important will be the need to stop the French media campaign for Lagarde and with it the influence that will be wielded by Sarkozy. It was one thing to have DSK as head of the IMF as he was not a tool of President Sarkozy, but the same thing cannot be said of FM Lagarde.
Tags: BLS, center-right, Christine Lagarde, Dollar, Dow, ECB, EU, Euro, Fed, Financial Times, IMF, Jackson Hole, Keith Hall, Nonfarm Payroll, PMI, popular party, Portugal elections, QE3, S&P, Simon Johnson
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