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US employment report today |
| by Mark Deans, Moneycorp - 06/03/2011 |
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"- Economists see payrolls up by 165k-190k
- Investors look for a lower number" |
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Richard Nixons War on Drugs began three decades before George Bush declared War on Terror. Its 30-year head start has made it no more effective, according to the Global Commission on Drug Policy (bet you didnt even know there was one). Luminaries including ex-Federal Reserve chairman Paul Volcker, ex-secretary of state George Schultz, ex-UN secretary general Khofi Annan, ex-record producer Richard Branson and soon-to-be-ex-Greek prime minister George Papandreou came to the politically incorrect conclusion that prohibition is not working. The commission condemns the drug war as a failure and recommends major reforms of the global drug prohibition regime.
Inevitably there will be many who disagree. They will cite the myriad examples of aberrant behaviour that can result from drug misuse, such as Britains Got Talent, quantitative easing and another huge wad of good money for Greece. But sooner or later they will have to admit defeat. They are powerless to prevent such waywardness and must come to terms with it. The toughest one to handle will be the second Greek bailout; unlike BGT and quantitative easing you cannot just turn it off. There will be no disagreement from the euro, of course. It will be perfectly happy to profit from the misery of German taxpayers and Greek non-taxpayers. The EU/ECB/IMF review of Greeces own efforts to cut spending and sell state assets should be complete by the end of today. That will give European finance ministers nearly four weeks to decide whether Athens deserves another handout and, if so, how it can be dressed up in order not to look like an event of default.
Whilst there is no evidence of drug misuse in the budget negotiations going on in Washington, it cannot be ruled out. The Democrat president wants to raise the debt ceiling prescribed by the second Liberty Act of 1917 so he can carry on with welfare spending. The Republican congress will not allow it unless he cuts spending. Both sides are deeply entrenched in their views and refuse to budge. Unless the debt ceiling is raised, no more federal borrowing is allowed and the government will run out of money on 2 August. Moodys is threatening to lower the United States triple-A credit rating if that happens. As if to prove how serious it is, Moodys has today downgraded the ratings of eight Greek banks.
Although it is unlikely the US downgrade will come to pass these budget spats are usually sorted out at the last minute Moodys threat has not improved investors appetite for the dollar. It is down by a cent on the day against the euro and slightly lower against the yen. Thursdays US ecostats did not help either; whilst the weekly figure for initial jobless claims was a touch lower, continuing claims were unchanged and factory orders fell by -1.2% in April.
The purchasing managers index for Britains construction sector was higher in May, up from 53.3 to 54.0, but provided only brief respite for sterling, which was under pressure all day. Weighing on the pound was a comment from Bank of England executive director Paul Fisher, who said in an interview he would consider a further round of quantitative easing if the economy worsened.
The first figures out today showed a -1.6% fall for New Zealand building permits and a point-and-a-half drop in the Australian services PMI that took it minutely below the contraction/growth dividing line at 49.9. The two Chinese services PMIs moved in opposite directions, providing not an iota of guidance to investors; one fell from 62.5 to 61.9, while the other rose from 51.6 to 54.3. There are more services PMIs to come from Italy, France, Germany, Euroland, Britain and the United States.
More important than them will be the monthly change in US non-farm payrolls, a barometer not just of American economic direction but a pointer for global growth. After ADPs weak reading for employment change on Wednesday investors are psyched up for a low number today, even though the consensus among analysts is that non-farm payrolls will have gone up by something between 165k and 190k. That expectation suggests short-dollar positions and would imply a rally for the dollar if it turned out that the analysts had got it right after all.
Have a good weekend and dont forget there are only two days in this one
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