Wow, now we are looking at a good open!
The ECB did, as expected, tighten rates by a quarter point, now 4.25% to our Fed’s 2% and our payrolls were indeed down 62,000 jobs with 5.5% unemployment and May was revised DOWN another 13,000 jobs to minus 62,000 as well. All this was worse than expected with manufacturing and construction losses of 69,000 jobs were combined with 51,000 lost "Professional and Business Services" jobs and those were offset by 29,000 new government jobs, 15,000 Health care jobs and 7,000 service sector jobs.
So, the short story is you are losing your job and becoming either the foreign health-care worker you once hired to watch your granmother or you are getting your government paycheck by working for the man who has expanded government more than any TWO Presidents in US history. The good news is wages went up 3.4%, we need some wage inflation to pay for the gas to get to work!
Hopefully, all this bad news is already baked into the cake and we can limp into earnings next week with our heads held - well, not exactly high but not quite on the chopping block just yet. Earnings are either going to set us free or be the executioner’s axe that will destroy the markets in an Asian-style melt-down that will hit this country like a tsunami from which we will have a very hard time recovering.
I laid out my bullish premise in last night’s wrap-up and let’s focus on that ONE THING which can turn these markets around. It is a very rare opportunity to have a reliable signal that will let us know when it’s a good time to commit so let’s stay on our toes and stick with the game plan. Three quarters of the global economy is indicating they are serious about fighting inflation - no need to guess who the jokers are in the eyes of the world but, gluttons that we our, we are only 300M gluttons and we can only consume 25% of the world’s resources - believe me, if we COULD consume more, we WOULD consume more! We discussed during the last G8 meeting that Bush was given a month or so to take action after which the World would move on and let him twist in the wind and tha’ts what’s happening. Too bad it’s US that pays the price for his lack of action…
South Korea is having violent protests and strikes as inflation has exacerbated resentment about wealth concentration and limited opportunities and left Koreans yearning for the good old days of socialist military dictatorships . "Democratization has been a disappointment," says Yoon Geum-soon, who runs a small fruit farm and is active in a women’s rights group staging protests. "All the wealth goes to a few people, while others work hard for too little." Its very sad that a Korean fruit farmer has a better grasp of economics than the average US voter.
The World Bank is calling on the G8 to do more to fight inflation and the G8 meets again in Japan next week so we’ll see how that goes. The Hang Seng dropped another 2% this morning (461 points) giving them a down 1,600 point week (7%), The Nikkei recovered from a steep drop at the open and finished the week down "just" 350 points, right at the 2.5% rule. The Shanghai gained 2.5% on the day but still finished the week below 300 at 295, still down over 50% from their highs.
Europe had a terrible downturn yesterday and is improving back to even off a terrible open this morning. Trichet’s remarks were somewhat comforting to the markets and the key is to let them know that the ECB is on top of things so they can move on with their investing. Mission accomplished there!
Today is a short session and it wil be a real disappointment if we don’t get somewhat of a bounce to float us into the weekend. If oil goes over $145 I think we’ll go red but, other than that, it’s bargain hunting time.