NEW$ & VIEW$ (16 Feb. 2012)

Smile   First-Time Jobless Claims in U.S. Unexpectedly Decrease to a Four-Year Low

Applications for unemployment insurance payments decreased 13,000 in the week ended Feb. 11 to 348,000, less than the lowest forecast of economists surveyed by Bloomberg News and the fewest since March 2008, Labor Department figures showed today.

Smile   U.S. INDUSTRIAL PRODUCTION was unchanged in January (+3.3% YoY) following a revised 1.1% December rise, initially reported as 0.4%. Warm temperatures again lowered utility output by 2.5% last month (-7.5% YoY), down for the fifth month in the last six. Manufacturing production rose 0.7% in January after surging 1.5% in December. Business equipment production posted a 1.8% increase (+10.9% YoY) after December’s 1.4% rise. This was despite the reduction in bonus depreciation. Auto production jumped 5.9% (17.0% YoY). (Chart from Haver Analytics)

Fed rules out further easing to boost recovery

Only a few members of the rate-setting Federal Open Market Committee thought that economic conditions “could warrant the initiation of additional securities purchases before long”.

Money Money GLOBAL EASING

As Don Coxe says, the “financial heroin” flows freely (chart from Jeff Gundlach, Chief Investment Officer of DoubleLine)

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Wilted rose   Moody’s Puts BofA, Goldman on Review

Moody’s Investors Service placed the ratings of Bank of America, Citigroup, Goldman and three others on review for possible downgrade because it says the business’ profitability will be diminished longer term.

Moody’s also said Wednesday it is reviewing J.P. Morgan Chase & Co., Morgan Stanley and Royal Bank of Canada for possible downgrade.

Moody’s Investors Service placed various ratings of 114 financial institutions in 16 European countries on review for possible downgrade Thursday, highlighting the region’s banks’ vulnerability to the euro-zone sovereign debt crisis.

The institutions affected include Barclays, BNP Paribas, Commerzbank, Credit Agricole, Deutsche Bank, HSBC, ING Group, Royal Bank of Scotland, Santander, Societe Generale and UniCredit.

SocGen Net Dives, Misses Views

French bank Société Générale reported an 89% drop in fourth-quarter net profit as it booked restructuring charges and took further write-downs on its Greek sovereign bonds.

Strong Bond Auction for Spain

Spain on Thursday continued its recent series of strong government bond auctions as it sold €4.074 billion ($5.32 billion) in bonds, slightly more than planned, bringing its bond funding completion to 34% of its annual gross issuance target. Year to date, Spain has raised €29.229 billion via auctions and syndicated taps of government bonds, out of its annual gross issuance target of €86 billion.

The average yield on the July 2015 bond was 3.332%, up from 2.861% at the previous auction Feb. 2.

Pointing up   Oil Rise Threatens Recovery

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CHINA EXPORTS: THERE’S MORE THAN SEASONALITY

Foreign trade outlook remains challenging  The foreign trade outlook for the first quarter remains challenging due to slowing demand for consumer goods worldwide, Shen Danyang, spokesman of the Ministry of Commerce, said on Thursday.

Adjusted for seasonal variation, foreign trade growth continued to slow, Shen said, because demand for Chinese goods is declining among China’s main trade partners — the US, the EU and Japan — where unemployment remains high.

The growth of last year’s exports to the EU, which accounts for nearly one-sixth of China’s export market, was six percentage points lower compared with the average level. Exports to the region dipped 3.2 percent year-on-year in January.

China’s FDI falls 0.3% in Jan    China made actual use of $9.997 billion of foreign direct investment (FDI) in January, down 0.3 percent year-on-year, the Ministry of Commerce said Thursday.

The drop was due to a drop in business activity during the Spring Festival holiday, said Shen Danyang, spokesman for the MOC.

Just kidding   That is more seasonal rubbish. The problem is Europe:

In January, investment from the United States (+29%!) and Asian countries (+0.8%) and regions increased while that from the European Union (EU) fell 42%.

The reality: “dim outlook” Storm cloud

The outlook for the nation’s FDI this year is not favorable amid increasing uncertainties both at home and abroad, said Shen.

“The sluggish growth in global direct investment and increasing production and operational pressures in the country provide a dim outlook,” he said.

TALK ABOUT NEGATIVE SURPRISE!

Surprised smile   China May Set Lowest Growth Target Since 2004, Government Economist Says

Premier Wen Jiabao may announce a 7 percent or 7.5 percent target for economic growth this year at the annual National People’s Congress meetings that convene in March, Fan said in an interview today. The last time China set a growth target below 8 percent was in 2004, when the goal was 7 percent.

Wen vows to speed up fiscal, financial reforms   Premier Wen Jiabao vowed on Wednesday to speed up the pace of fiscal and financial reform this year to guarantee steady growth amid global and domestic uncertainties.

According to the Ministry of Finance, total tax revenues rose 22.6 percent to 8.97 trillion yuan ($1.42 trillion) in 2011. The full-year growth rate was flat with that of 2010. But the pace of growth declined from 32.4 percent in the first quarter to 6.8 percent in the final three months. (…)

China lowered businesses’ tax burdens last year by cutting import tariffs on energy and raw materials and raising the thresholds on value-added taxes and turnover taxes.

Pointing up   Personal income tax revenue slid 5.5 percent year-on-year in the fourth quarter after the government raised the tax threshold in September.

Rainbow   BOE: U.K. Economy on Slow Path to Recovery  The U.K. economy is on a slow and gradual path to recovery, guided by the right mix of budget and monetary policies, the Bank of England said in its latest assessment of the U.K.’s prospects.

Markit agrees:

Latest official statistics suggest a stabilisation in the UK job market at the end of 2011. Although unemployment climbed 48,000 to 2.67 million in the three months to December, the latest rise was the smallest since last summer and well below the strong rates of increase seen in the interim.
January’s monthly rise in the claimant count was again modest at 6,900, despite being the fastest in four months. Moreover, employment was up 60,000 in the final quarter to 29.13 million, the highest level since last June. Growth was supported by an expansion of job vacancies to a ten-month high of 476,000.

But the squeeze remains on:

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Thai Finance Minister: GDP Could Grow By 7% In 2012

Thailand’s deputy prime minister and finance minister projects that the Thai economy could grow by as much as 7% this year without the danger of overheating, despite the impact of the flooding late last year.

GOOD CHARTS

Jeff Grundlach had many other interesting charts in his presentation:

Boy Girl This one shows that much of the recent decline in the participation rate is in 16-19 and the 20-24 age group, not as economically significant than if it were in the prime working and family-forming groups. If these young people have decided to go back to school, as recent consumer loan stats suggest (student loans jumped 55% in the first 9 months of 2011), they and the economy will eventually benefit. It thus appears that the drop in the PR is not as dramatic as many want us to believe.

Note also the uptrend in the 55+ age group. So long “freedom 55” as the collapse in house prices and exceedingly low interest rates prevent people from living from their lifelong savings.

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BEST OFFENSE IS DEFENSE!

Two more charts, these on defense spending, showing how the U.S. could, if push came to shove, significantly improve its budget situation.

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