February 04, 2011

Market Wrap: for the week ending 04-Feb-2011

Weekly Snapshot
• The U.S.unemployment rate fell by 0.4 percentage points to 9.0% in January (BLS)
• Nonfarm payrolls increased by 36,000 short of analysts' estimate for a 140,000 gain (Bloomberg)
• The European Central Bank kept interest rates at a record low of 1% (Reuters)
• The industrial producer price index rose by 0.8% in the Euro area in December 2010 (Eurostat)
• Prices of agricultural commodities at new highs, sugar at 30-year high (FT)
• Euro area seasonally-adjusted unemployment rate unchanged at 10.0% in December 2010 (Eurostat)
• The U.S. Treasury has been urged to sell "ultra-long" bonds with maturities of up 100 years (FT)
• Copper continues its ascent, reaching a record high of $10,000 per metric ton (Bloomberg)
• The U.S. is on track to hit its $14.29 trillion debt ceiling by the end of May (Bloomberg)
• The Federal Reserve has surpassed China as the leading holder of US Treasury securities (FT)
• S&P cut Ireland's credit rating to A-/A-2 from A/A-1 and maintains a negative outlook (Reuters)
• Brent Crude oil surges above $100 for the first time in over two years (FT)

Market Barometers

ST-2011-0204   FX-2011-0204
     

Chart Of The Week
Friday’s employment report was another one of those head scratchers. Although the unemployment rate fell by 0.4% to 9%, companies didn’t exactly go on a hiring spree; they added only 36,000 new jobs to their payrolls.  Keeping in mind that the U.S. needs to create at least 100,000 jobs per month just to keep up with demographics, the employment situation is not at all rosy. In terms of creating and finding jobs, education still appears to be the one factor separating the wheat from the chaff. Case in point is this fascinating chart courtesy of Calculated Risk.

UnemployedEducationJan2011
source: www.calculatedriskblog.com

Recommended Read 
Please consider “The Fed passes China in Treasury holdings.”  An interesting change in the terms of who owns U.S. Treasuries. 

Based on weekly data released on Thursday, the New York Fed’s holdings of Treasuries in its System Open Market Account, known as Soma, total $1,108bn, made up of bills, notes, bonds and Treasury Inflation Protected Securities, or Tips.

When the Fed buys U.S. Treasuries it’s akin to putting your money from your left pocket into your right pocket. Sadly, if an individual investor does that, it has no effect on his/her financial situation.  When the Fed does it, it’s called QE2 and it is supposed to fix the economy.  I will file this under: Things that me go hmmm…

Holders of Treasuries

Recommended Video 
The entertaining and ├╝ber-passionate Howard Davidowitz is always fun to watch. You may or may not agree with some of his political comments but he does have a refreshing common sense approach to looking at the markets and the economy. Enjoy!

Good luck and good investing!

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