Will Initial Jobless Claims continue the trend lower?
With two strong consecutive initial jobless claims reports pushing the 12-week rolling trend down to levels not seen since the third quarter 2008 (see chart below) it will be interesting to see if the trend continues today at 13:00 GMT. Economists are looking for 375K up from 364K last week; the 12-week average stands at 394K. As initial jobless claims are well below the break-even point for net job creation the US economy is on its way to recover the lost jobs since the crisis; the US economy however still needs to produce six million jobs on a net basis to recover the loss in employment.
The S&P 500 ended down 1.3 percent yesterday so with good numbers from initial jobless claims stocks could go higher in today’s session.
Later today Chicago PMI figures for December are expected (14:45 GMT) to come out at 61.0 down from 62.6 in November and pending home sales for November are expected (15:00 GMT) to come out at 1.5 percent MoM compared to a 10.4 percent gain MoM in October.
Italian auction saw lower yields on weak demand; stocks mixed in Europe
Today’s Italian bond auction of longer term debt was a mixed event. Italy missed its funding target but got lower yields with the 2022 bonds seeing yields of 6.98 percent compared to 7.56 percent at the November 29 auction with a bid-to-cover of around 1.36. Hardly a success but given current market conditions it seems okay. The real test of Europe’s sovereign debt markets will come in the first and second quarters of 2012.
Euro STOXX 50 is up 0.3 percent and the EURUSD has hit its lowest level since September 2010 (see chart below). Given the average EURUSD has been 1.3914 in the last five years a lower exchange rate would definitely provide some tailwind for the weak European countries and effectively it might offset the weakening of the region’s economy.
Port of Rotterdam sees 0.8% increase in 2011 throughput
The largest port in Europe is out saying that total Throughput in 2011 is up 0.8 percent from 2010 with growth coming from agricultural bulk, coal and containers. The port’s expectations are to maintain current throughput in 2012 and CEO Hans Smit sees a reasonable chance that the European crisis is over in the second half of 2012. While we do not agree with Hans Smit that Europe’s debt crisis is over in 2012, it is encouraging to hear that the largest port in Europe sees steady throughput. Given its interaction with global shipping companies the port has a good sense of global trade and thus these expectations should be seen as an adequate leading indicator on trade in Europe.
The chart above is the tonnage weighted throughput from the Port of Rotterdam and Hamburg indexed at 100 in 1975; the two ports have around 26 percent market share in Europe. The chart shows that the recession in the early 80s was deep in terms of total cargo flowing in and out of Europe whereas the dip in 2009 is almost fully recovered.
Peter Garnry
SAXO BANK