Asia FX By Cornelius Luca - Wed 18 Jul 2012 17:12:18 CT (Source:CME/www.lucafxta.com)
The appetite for risk was divergent on Wednesday. While foreign currencies made little progress, the US stocks surged in very thin volume and the gold/oil ratio fell. The market is still digesting comments by German Chancellor Angela Merkel that not all is well in the Eurozone debt crisis; whereas this is obvious, the market was unnerved by the mere fact that she approached the issue. In the US, the Beige Book stated the obvious: low growth and even lower job creation. The short-term outlook for the European and commodity currencies is sideways. The medium-term outlook for most of the foreign currencies is bearish. The LGR short-term model is short on the European currencies and yen. Good luck!
Overnight
US: Housing starts expanded 6.9% to a seasonally adjusted annual rate of 760,000 in June compared to May's upwardly revised to 711,000 from the 708,000 initially reported. Building permits fell 3.7% to a seasonally adjusted annual rate of 755,000 in June from May's upwardly revised figure of 784,000 from 780,000.
US: In its latest "Beige Book", the Federal Reserve said that economic activity continued to expand at a modest to moderate pace in June and early July, while job growth grew at a slow pace across most of the twelve Federal Reserve districts.
Today's economic calendar
Japan: All Industry Activity Index for May
Japan: Leading economic index for May
Asian Stocks Rise as U.S. Housing Data Boosts Confidence (Source: Bloomberg)
Asian stocks rose, with the benchmark index headed toward its biggest gain in almost three weeks, after U.S. housing starts jumped to the highest level in four years. Yaskawa Electric Corp. (6506), an industrial robots maker, jumped 8.6 percent after raising its first-half profit forecast. BHP Billiton Ltd. (BHP), Australia’s biggest oil producer, increased 1.7 percent as crude prices exceeded $90 a barrel for the first time since May. Li & Fung Ltd. (494), which gets about two-thirds of its sales from the U.S., climbed 1.7 percent in Hong Kong. The MSCI Asia Pacific Index (MXAP) gained 1.1 percent to 117.02 as of 10:51 a.m. in Tokyo, headed for its steepest advance since June 29. About four shares rose for each that fell. The Asian gauge dropped 10 percent from this year’s high on Feb. 29 through yesterday as U.S. and China reported economic reports that signaled the world’s two largest economies are slowing.
“The U.S. economy has gone through a bit of soft patch, but the housing sector does seem to be heading for recovery, which is positive from a longer-term perspective for America,” said Shane Oliver, Sydney-based head of investment strategy at AMP Capital Investors Ltd., which has almost $100 billion under management. “The market still likes what it sees.”
Hong Kong Stocks Rise on China Easing Speculation (Source: Bloomberg)
Hong Kong stocks rose, headed for the third day of increase this week, amid speculation China will take more action to bolster growth and after new housing starts in the U.S. jumped to the highest since 2008.
Bank of Communications Co., China’s fifth-largest bank by value, rose 1.9 percent. Cnooc Ltd., China’s No. 1 offshore oil producer, climbed 2.6 percent as crude traded near a seven-week high. Li & Fung Ltd. (494), a supplier to Wal-Mart Stores Inc., advanced 1.6 percent for a fourth day of gain. The Hang Seng Index advanced 1 percent to 19,438.44 at 9:46 a.m., with five companies climbing for each that dropped in the 49-member gauge. The Hang Seng China Enterprises Index of mainland companies rose 1.5 percent to 9,430.75. The benchmark Hang Seng Index (HSI) fell 11 percent from this year’s high in February through yesterday on signs Europe’s debt crisis is worsening while growth slows in China and the U.S. The drop cut the value of shares on the gauge to 10.2 times estimated earnings on average, compared with 13.2 for the Standard & Poor’s 500 Index and 10.9 for Stoxx Europe 600 Index.
Topix Heading for First Gain in 10 Day on U.S. Housing (Source: Bloomberg)
Japanese stocks rose, with the Topix Index rising for the first time in 10 days, after U.S. housing starts jumped to the highest in almost four years, boosting the outlook for exporters. Machinery maker Komatsu Ltd. (6301), which depends on the Americas for 23 percent of its sales, gained 3.3 percent. Advantest Corp., the world’s top producer of memory-chip testers, surged 5 percent after industry bellwether Intel Corp. topped profit estimates. Yaskawa Electric Co. jumped 7.8 percent after the robotics maker beat earnings expectations. The Topix gained 0.7 percent to 745.63 as of 10:40 a.m. in Tokyo after yesterday capping a nine-day losing streak, the longest since July 2009. The Nikkei 225 Stock Average (NKY) added 0.7 percent to 8,786.43, with about four shares rising for each that fell. Stocks pared gains as the yen rose against most of its major counterparts, weighing on exporters.
“The U.S. economy has gone through a bit of soft patch, but the housing sector does seem to be heading for recovery, which is positive from a longer-term perspective for America,” said Shane Oliver, Sydney-based head of investment strategy at AMP Capital Investors Ltd., which has almost $100 billion under management. “The market still likes what it sees.” The Topix rebounded 7 percent from a 29-year low on June 4 as concern eased about Europe’s debt crisis and central banks around the world cut interest rates to shore up growth. Shares on the index are valued at 0.9 times book value, compared with 2.2 for the Standard & Poor’s 500 Index (SPXL1) and 1.4 for the Europe Stoxx 600 Index. A number below one means investors can buy companies for less than the value of their assets.
U.S. Stocks Rise After Housing Starts Increase (Source: Bloomberg)
U.S. stocks rose for a second day after companies from Intel Corp. (INTC) to Honeywell (HON) International Inc. reported profit that beat estimates and housing starts increased to the fastest rate in almost four years. Technology stocks had the biggest advance out of 10 groups in the Standard & Poor’s 500 Index as Intel jumped 3.3 percent after posting profit that topped projections while scaling back its annual sales forecast. Honeywell surged 6.7 percent, pacing gains in industrial companies. EMC Corp. rallied 9.4 percent after announcing a new chief executive officer at VMWare Inc. (VMW), the software maker in which it owns a majority stake. The S&P 500 (SPX) gained 0.7 percent to 1,372.78 at 4 p.m. in New York. The benchmark gauge rose 0.7 percent yesterday. The Dow Jones Industrial Average added 103.16 points, or 0.8 percent, to 12,908.7.
“There’s some reduced pessimism about earnings season and the outlook going forward,” Peter Tuz, who helps manage about $800 million as president of Chase Investment Counsel Corp. in Charlottesville, Virginia, said in a telephone interview. “People were expecting worse numbers from lots of companies.” Housing starts rose 6.9 percent last month to a 760,000 annual pace after a revised 711,000 rate in May that was faster than initially estimated, the Commerce Department reported. The median forecast of 79 economists surveyed by Bloomberg News called for a 745,000 rate. Building permits fell, reflecting a drop in applications for apartment construction.
European Stocks Advance as Banks Beat Analyst Estimates (Source: Bloomberg)
European stocks advanced for the third time in four days after lenders including Credit Suisse Group AG (CSGN) reported profits that beat estimates, while minutes showed the Bank of England may reconsider the case for an interest-rate cut. Credit Suisse, the second-biggest Swiss bank, jumped 4.5 percent after announcing a higher cost cutting-target and boosting capital. Bankia SA (BKIA) surged 14 percent after Economy Minister Luis de Guindos said Spain will block banks selling preferred stocks to retail investors. ASML Holding NV (ASML) was among the main gainers on a measure of technology stocks. The Stoxx Europe 600 Index (SXXP) added 1.1 percent to 258.93 at the close of trade. Shares have climbed 11 percent from this year’s low on June 4 as the European Central Bank and People’s Bank of China cut their benchmark interest rates and euro-area leaders eased repayment rules for Spanish banks.
“We have a lot of monetary stimulus coming from others like the ECB and the Bank of England and even if the Fed doesn’t join in with QE3, the feeling is still that QE3 could be forthcoming, should the economy weaken,” Edmund Shing, an equity strategist at Barclays Capital, said, referring to a potential third round of quantitative easing by the Federal Reserve. “The hope is that the economy will improve and if that doesn’t happen there will be monetary stimulus.”
Emerging Stocks Fall From 1-Week High on China, Profit Concerns (Source: Bloomberg)
Emerging-market stocks declined from a one-week high after Chinese Premier Wen Jiabao warned of a “severe” jobs outlook and amid concern corporate earnings growth is slowing. The MSCI Emerging Markets Index fell 0.2 percent to 930.90 at the close of trading in New York, snapping a three-day advance. The benchmark index pared some of its retreat after housing starts in the U.S. approached a four-year high. Mining company Vale SA (VALE5), whose biggest export market is China, was among companies falling in Brazil. Inotera Memories Inc. (3474) tumbled to a five-month low after the Taiwanese chipmaker reported a loss and as Intel Corp., the world’s largest semiconductor maker, cut its forecast.
Wen’s comments yesterday about the labor situation underscored concern that China’s weakest economic growth since 2009 will lead to increasing job losses. Intel Chief Financial Officer Stacy Smith said slower spending in Europe and the U.S. as well as weaker growth in China forced the company to reduce its sales target for the year. Beginning construction of U.S. homes rose more than forecast in June, indicating a brighter outlook for the residential real estate market. “Investors are concerned that China may be facing a hard landing as economic activity has been decelerating,” Morgan Harting, a portfolio manager at AllianceBernstein Investments Inc., managing about $100 million in assets, said by phone. “Economic trends in the U.S. and China are central to any view on emerging markets.”
Yen Gains Versus Euro, Dollar Before German Bailout Vote (Source: Bloomberg)
The yen advanced against most major counterparts as concern about the implementation of measures to stem Europe’s debt crisis supported demand for Japan’s currency as a haven. The yen held gains from yesterday before German lawmakers vote on a bailout for Spanish lenders. Chancellor Angela Merkel called on fellow leaders to work harder to make Europe succeed without waiting for unconditional German help. The dollar slid to the lowest in 2 1/2 months versus its Australian counterpart before a U.S. report today that may show first-time claims for jobless benefits climbed, boosting prospects the Federal Reserve will add to easing measures that debase the greenback. “Nothing has been resolved on Europe’s debt crisis and it won’t end any time soon,” said Marito Ueda, senior managing director in Tokyo at FX Prime Corp. (8711), a currency-margin company. “The yen is being bought in such a negative situation because there are few other choices.”
The yen gained 0.1 percent to 96.71 per euro as of 10:06 a.m. in Tokyo. It touched 96.17 on July 16, the strongest level since June 1. The 17-nation euro was little changed at $1.2287. The dollar slid 0.1 percent to 78.69 yen and touched 78.67, the weakest since June 18. It traded at $1.0371 per Australian dollar after earlier reaching $1.0379, the weakest since May 1. German lawmakers are due to vote in a special session of the lower house today in Berlin after the Finance Ministry asked parliament in a July 16 letter to support aid of as much as 100 billion euros ($122.8 billion) for Spain’s banks. The money would come from the temporary backstop, the European Financial Stability Facility, and then transfer to the future European Stability Mechanism.
FOREX-Euro steadies vs dlr, door to Fed easing open
LONDON, July 18 (Reuters) - The euro steadied against the dollar as investors focused on a gloomy assessment of the U.S. economy from Federal Reserve Chairman Ben Bernanke, that left the door open for more monetary easing and dampened demand for
the greenback.
"Bernanke did not give any clear signal of policy easing but left the door open to more easing if required. It's a reiteration of Fed policy from the last meeting but has not really provided fresh impetus to market direction," said Lee Hardman, currency economist at Bank of Tokyo-Mitsubishi.
Treasury Yield Is Near Record Low After Bernanke Speech (Source: Bloomberg)
Treasury benchmark 10-year yields were five basis points from the record low after Federal Reserve Chairman Ben S. Bernanke said the U.S. fiscal situation is “unsustainable,” supporting demand for the safest assets. Bernanke said yesterday economic activity “decelerated” during the first half of the year, adding that the central bank is “prepared to take further action as appropriate.” The Treasury is scheduled to auction $15 billion of 10-year inflation-indexed debt today. “Our economy certainly isn’t moving anywhere fast,” said Marc Fovinci, who helps oversee $3.1 billion as head of fixed income at Ferguson Wellman Capital Management Inc. in Portland, Oregon. “That’s going to keep a flight-to-quality bid.” The 10-year note yielded 1.49 percent as of 9:50 a.m. in Tokyo, according to Bloomberg Bond Trader prices. The 1.75 percent note due in May 2022 changed hands at 102 11/32. The all-time low yield was 1.44 percent set June 1.
A year-end “fiscal cliff” would damage the recovery, Bernanke said in response to questions before the House Financial Services Committee in Washington, referring to tax cuts on wages, capital gains, dividends and estates that are scheduled to lapse. “He seems to be a little more negative on the economy than most people thought, so that’s why you have a very good bid for Treasuries,” Ray Remy, head of fixed-income in New York at Daiwa Capital Markets America Inc., one of 21 primary dealers that trade directly with the Fed, said yesterday.
Buyers Bet Wen Can’t Keep Prices Down as Home Sales Gain (Source: Bloomberg)
Sales at Sunac West Chateau, a residential project in Beijing, surged almost 50 percent in June as the developer opened new buildings to attract buyers betting on a recovery even as the government pledges to keep a lid on the housing market. “In the first half of the year, it was like gazing at flowers in a fog,” said Lou Yanqing, deputy sales manager of the project, using a Chinese expression to describe the uncertainty over the government’s policies to curb house price gains. “We’re seeing some sunshine now, and going forward there’s a big chance that the clouds will clear,” she said. Premier Wen Jiabao said July 7 that citizens are worried prices will rise again, reiterating a pledge that his government will “unswervingly” continue property controls. Recent data suggest buyers aren’t listening: property sales and prices have rebounded as local governments relaxed some housing restrictions and the central bank cut interest rates.
“The possibility that history will repeat remains,” Credit Suisse Group AG analyst Vincent Chan said in a phone interview from Hong Kong, referring to past property surges that followed sales increases. A 20 percent to 30 percent rebound is possible if the government, similar to past cycles, “mildly drops its tightening policy,” Chan wrote in a July 4 report. Existing home prices in Beijing, Shanghai, Guangzhou and Shenzhen surged 42 percent, 58 percent, 79 percent and 69 percent respectively in the 24 months from February 2009 as China loosened property curbs, according to Credit Suisse.
Home Starts in U.S. Rise to Highest Level Since 2008 (Source: Bloomberg)
New U.S. home construction rose in June to the highest level in almost four years, indicating the residential real estate market is strengthening even as other parts of the economy cool. Housing starts rose 6.9 percent to a 760,000 annual pace after a revised 711,000 rate in May that was faster than initially estimated, the Commerce Department reported today in Washington. The median forecast of 79 economists surveyed by Bloomberg News called for a 745,000 rate. Record-low mortgage rates and cheaper properties are luring buyers, prompting builders such as Ryland Group Inc. (RYL) to boost construction. The gain underscores comments by Federal Reserve Chairman Ben S. Bernanke that the industry is on the mend, three years since the start of the expansion.
“Low borrowing costs certainly help at the margin, but the biggest thing is affordability in terms of the pricing,” said Stephen Stanley, chief economist at Pierpont Securities LLC in Stamford, Connecticut, who correctly forecast June starts. Housing is “making a very modest contribution to growth. Unfortunately, it feels like everything around it is crumbling.” The June pace was the fastest since October 2008, and estimates in the Bloomberg survey ranged from 710,000 to 800,000. Ground-breaking on new homes in May was revised from a previously reported 708,000.
Bernanke Says Fed Can Remove ‘Punch Bowl,’ Curb Inflation (Source: Bloomberg)
Federal Reserve Chairman Ben S. Bernanke sought to assure lawmakers the Fed can limit inflation while providing record stimulus and won’t allow consumer prices to rise in return for faster economic growth. “It will be a similar pattern to what we’ve seen in previous episodes where the Fed cut rates, provided support for the recovery, and when the recovery reached a point of takeoff where it could support itself on its own, then the Fed pulled back, took away the punch bowl,” Bernanke told the House Financial Services Committee today in Washington. Bernanke, on his second day of testimony to Congress, responded to lawmakers who questioned his ability to control inflation after cutting the Fed’s key interest rate almost to zero and expanding its balance sheet to a record $2.87 trillion in a bid to boost growth. “There is so much money out there that this thing is going to really go and inflation is going to be a huge problem,” said Representative Stephen Fincher, a Republican from Tennessee.
Republican Representative Jeb Hensarling of Texas questioned why the “greatest monetary and fiscal stimulus thrown at an economy in our history” has failed to reduce unemployment and boost growth, and whether the economy suffered a “profound failure of monetary policy” because of the Fed’s unprecedented actions.
Fed Beige Book Says Growth Was ‘Modest to Moderate’ in June (Source: Bloomberg)
The Federal Reserve said the economy expanded at a “modest to moderate” pace in June and early July, as retail sales and manufacturing cooled in some regions. “Manufacturing activity continued to expand slowly in most districts,” the Fed said today in its Beige Book business survey, which is based on reports from its 12 district banks. “Employment levels improved at a tepid pace.” The New York, Philadelphia, and Cleveland districts “noted that activity continued to expand, but at a slower pace since the last report, while Richmond cited mixed activity.” The report, which gives central bankers anecdotal evidence on the economy two weeks before they meet in Washington, supports Fed Chairman Ben S. Bernanke’s view that the U.S. lost momentum in the first half of 2012. Bernanke, in a second day of congressional testimony today, repeated that progress on unemployment may be “frustratingly slow” and the Fed is ready to take further action to boost the recovery if necessary.
“Overall, the report is tepid,” Diane Swonk, chief economist at Mesirow Financial Inc. in Chicago, said in an interview on Bloomberg Radio’s “The Hays Advantage” with Kathleen Hays. “It really echoes what the chairman has been telling us for the last two days, and that is that economic outlook is not looking too great. The economy has slowed.”
Housing Starts in U.S. Probably Climbed in June as Rates Fell (Source: Bloomberg)
Builders probably broke ground on U.S. homes in June at the fastest pace in almost four years, indicating the outlook for residential real estate is brightening, economists said before a report today. Housing starts rose 5.2 percent last month to a 745,000 annual pace, the strongest since October 2008, according to the median estimate of 79 economists surveyed by Bloomberg News. Building permits, a proxy for future construction, dropped 2.4 percent to a 765,000 rate, the survey showed. Record-low mortgage rates and cheaper properties are attracting buyers, encouraging builders faced with lean inventories to boost construction. At the same time, limited employment opportunities and competition from distressed properties are hurdles for the industry.
“The long-awaited housing market recovery is definitely under way as demand is improving,” said Stuart Hoffman, chief economist at PNC Financial Services Group in Pittsburgh. “Continued growth in the number of households, pent-up demand, very low prices and mortgage rates that have resulted in record- high affordability” are underpinning demand, he said.
Temporary Work Demand Rises as Companies Avoid Commitments: Jobs (Source: Bloomberg)
As orders from food makers have picked up during the past year, Create-A-Pack Foods Inc. turned to a staffing company, Kelly Services Inc. (KELYA), to add about 100 workers. Hiring on a temporary basis saves money if an employee doesn’t work out and expands recruiting beyond Create-A-Pack’s Ixonia, Wisconsin, headquarters, Chief Executive Officer Glenn Cochrane said. “You can build good crews with temp services,” he said, noting that the company -- which packages products including sauces and icings in pouches, bottles and jars -- is seeking to fill another 28 positions. Create-A-Pack is among a growing number of businesses turning to staffing companies for temporary workers, reflecting employer concern about the U.S. economic outlook. The number of people on the payrolls of temp-staffing businesses grew 10.7 percent in June to 2.5 million from a year earlier, the biggest increase since May 2011, based on data from the Labor Department.
Demand for temporary employees is gaining momentum as companies seek more flexible staffing arrangements, according to Tobey Sommer, director of equity research in Nashville at SunTrust Robinson Humphrey Inc. This has helped create a shift within the labor force, as a “not-easily-forgotten recession” has made many executives cautious about hiring, he said.
Romney Seals Republican Nomination With Victory in Texas (Source: Bloomberg)
Voter disapproval of President Barack Obama’s handling of the economy is hindering his re- election prospects and keeping close his race with Republican challenger Mitt Romney, a New York Times/CBS News national poll shows. Romney is backed by 47 percent in the survey released today, Obama by 46 percent in figures that include voters who said they leaned toward one of the candidates. Excluding those voters, Romney led with 45 percent to 43 percent for Obama. The results, while within the poll’s error margin of plus- or-minus 3 percentage points, represent the first time Romney has had an edge in the Times/CBS survey since he emerged as the presumptive Republican nominee in early April. Obama led by 3 percentage points in a Times/CBS poll in March. The two were tied in an April survey with 46 percent each.
Since that poll, voter attitudes toward Obama’s economic record have declined. In the latest survey, 55 percent said they disapproved of his handling of the economy, while 39 percent expressed approval. In April, 48 percent disapproved and 44 percent approved.
China’s June Home Prices Rebound as Sentiment Improves (Source: Bloomberg)
China’s new home prices in June rose in the most number of cities tracked by the government in 11 months as buyer sentiment improved after the central bank cut interest rates.
Prices climbed in 25 cities out of the 70 the government looks at, the most since July last year. Prices fell in 21 from a month earlier, according to data released by the statistics bureau today. The eastern city of Hangzhou led the gain with a 0.6 percent jump from May, while major cities Beijing and Shanghai recorded gains of as much as 0.3 percent. Home prices were unchanged from May in 24 cities. The result poses a dilemma for outgoing Premier Wen Jiabao, who is trying to spur the slowest economic growth in three years with interest rate cuts. Shares of developers declined as the data makes it more difficult to loosen property policies, according to Nomura Holdings Inc. “There are no good methods in the short term,” said Yao Wei, a Hong Kong-based economist at Societe Generale SA. “If the government tightens further, that will hurt economic recovery. But easing will drive home prices to rebound.”
BOJ Opens Door to Negative Rates by Ending Yield Floor: Economy (Source: Bloomberg)
The Bank of Japan (8301) scrapped a 0.1 percent yield floor for government bond purchases, opening the door to the possibility of buying debt with negative returns. The central bank removed the limit on purchases of securities with maturities of one year or less in its so-called rinban operation, BOJ spokesman Tsuyoshi Nakamura said in Tokyo. The central bank is struggling to buy enough bonds to execute a stimulus program to strengthen the world’s third- biggest economy as Europe’s crisis and a global economic slowdown boost demand for the government’s debt. UBS AG said that the latest move indicated the central bank’s determination to press on with asset purchases and gave policy makers an extra tool if ever needed.
“I don’t think negative interest rates are going to happen any time soon in Japan, but this is probably a message from the BOJ that it’s ready to cope with any market turmoil stemming from the European crisis,” said Atsushi Ito, a senior rate strategist in Tokyo at UBS. “This shows their determination to fulfill their asset purchases as they’ve pledged.”
Japan Property Billionaire Mori Bets $202 Million on China (Source: Bloomberg)
Billionaire Akira Mori, the owner of Japan’s most profitable closely held developer, said he has formed a company to invest in China and advise Japanese companies on expanding there. “Japan’s environment is getting difficult; I want to build a company that is willing to take risks,” said Mori, 76, in an interview in Tokyo. Mori said he plans to expand the assets of MA Platform Group, set up with 16 billion yen ($202 million) of capital, to 50 billion yen in five years. MA Platform has invested 18 billion yen including financing so far. Mori seeks to invest in educational services and mass media in China, he said. The company became the second-largest shareholder in closely held Beijing-based Tsingda eEdu Corp., which offers classes over the Internet.
Japan’s more than a decade of deflation and sluggish economic growth has forced the Bank of Japan (8301) to keep interest rates near zero. In contrast, China surpassed Japan as the world’s second-largest economy in 2010 and has introduced a series of tightening measures to keep its economy from expanding too rapidly. Mori plans to take advantage of the near-zero interest rates in Japan to invest in one of the world’s fastest- growing economies.
BOE Policy Makers Say They May Reassess Rate-Cut Case: Economy (Source: Bloomberg)
Bank of England policy makers may reconsider the case for an interest-rate cut after assessing the impact of new lending and liquidity measures as Europe’s debt crisis keeps pressure on them to do more to stoke growth. The Monetary Policy Committee said while the arguments for and against cutting the benchmark rate from the current record low of 0.5 percent hadn’t changed since June, they may be reviewed in the coming months, according to the minutes of its July 4-5 meeting. The MPC voted 7-2 to increase quantitative easing by 50 billion pounds ($78 billion) to 375 billion pounds at the meeting. The Bank of England has joined counterparts around the world in expanding measures to support growth as the threat from the euro-area turmoil increases. The Bank of Japan has opened the door to buying debt with negative returns, and Federal Reserve Chairman Ben S. Bernanke said yesterday the Fed may take further action to boost the recovery.
“Central banks are looking to add to their options for further easing and reevaluate all the tools at their disposal,” said Chris Scicluna, an economist at Daiwa Capital Markets Europe in London. “With the exception of Japan, the outlook has deteriorated markedly across the major economies, and there may be further weakness in the euro area going into the end of the year.”
U.K. Unemployment Hits 9-Month Low as Labor Market Defies Slump (Source: Bloomberg)
U.K. unemployment fell to a nine- month low in the quarter through May as the London Olympics helped to create jobs, underlining the resilience of the labor market in the face of a recession and Europe’s debt crisis.
The jobless rate based on International Labor Organization methods fell to 8.1 percent from 8.2 percent in the period through April, the Office for National Statistics said today in London. Jobless-benefit claims rose 6,100 in June. The increase, though larger than the 5,000 median forecast in a Bloomberg News Survey, was inflated by a benefit-rule change that took effect May 21. The strength of the labor market is providing a boost for Prime Minister David Cameron as his government axes hundreds of thousands of state jobs to help cut the budget deficit and struggles to lift the economy out of its second recession since 2009. “The big question is can the labor market remain resilient given the economy’s ongoing weakness and the current very worrying and uncertain outlook,” said Howard Archer, an economist at IHS Global Insight in London. “In the very near term, the staging of the Olympics is likely to help matters further. However, further out the jobs outlook seems more problematic.”
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