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You Are Here: Home > Articles > Contributors > U.S. Morning Call for Thursday, August 14, 2008

U.S. Morning Call for Thursday, August 14, 2008
Aug 14, 2008

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Larry Swing

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  • The European DJ Stoxx 50 this morning is up +0.72% on better-than-expected earnings by steel-maker ThyssenKrupp and higher oil and mining stocks. European stocks shook off news that the Euro-Zone Q2 GDP fell -0.2% q/q (vs +0.7% in Q1) but rose +1.5% y/y. German Q2 GDP fell by -0.5% (vs +1.3% in Q1). Mining stocks are higher today with the $7.00 rally in gold prices and 6.7 cent rally in copper (BHP Billiton +6%, Rio Tinto +5%, Barrick Gold +1.4%) Asia-Pacific stocks today closed mixed: Japan -0.51%, Hong Kong +0.47%, China -0.05%, Taiwan +0.46%, Australia +0.60%, Singapore +0.17%, South Korea +0.62%, Bombay -2.44%.

  • Unemployment claims. Today's weekly unemployment claims report is expected to show a decline of -20,000 to 435,000, more than reversing last week's +7,000 increase to 455,000. Meanwhile, weekly continuing claims are expected to fall -1,000 to 3.331 million following last week's increase of +31,000 to 3.311 million. The labor market appears to be seeing further deterioration with initial claims last week rising to a 6-year high and with continuing claims rising to a 4-1/2 year high. Those new highs indicated that layoffs are picking up and that the number of people on unemployment is piling up. Payrolls have now fallen for seven consecutive months and the US unemployment rate is at a 4-year high of 5.7%. Fresh weakness in the labor market would not be surprising as businesses prepare for an extended period of sub-par economic growth tied to the fading federal stimulus program, continued high energy and commodity prices, the banking crisis, and the US housing crisis.

  • CPI Today's July CPI report is expected to show an increase of +0.4% m/m on an overall basis and +0.2% on a core basis (ex food and energy). That would follow June's report of +1.1% m/m overall and +0.3% core. On a year-on-year basis, the July CPI is expected to edge higher to +5.1% from the 17-year high of +5.0% in June. On a year-on-year basis, the July core CPI is expected to be unchanged from June at +2.4%. The June core CPI report of +2.4% was 0.4 points above the generally-accepted +2.0% ceiling for inflation, but was well below the 12-year high of +2.9% posted in September 2006. The Fed remains concerned about the US inflation outlook with the inflation statistics at high levels on an historical basis. However, the urgency about the inflation outlook has eased recently with the sharp downward correction in energy and commodity prices. That decline in energy and commodity prices will remove some of the upward pressure on the inflation statistics in coming months and give the Fed a little more breathing room to reflate the US economy before starting to remove its easy 2.0% monetary policy.

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    ...thanks for the trust you've shown in me and my business.

    by     Larry Swing
    larry@mrswing.com
    May the swing be with you...

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