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04 February 2011

US Data Shows Mixed Jobs Picture

Written by dslmpartners
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Global equity markets maintained a positive mood with follow through from Wall Street but continuing tensions in Egypt, uncertainty looms. In Asia, the MSCI Asia Pacific index rose again, 0.5%, for the fourth straight day. Japanese stocks shot higher after the news of a merger of two large steel companies raised hopes of consolidation and more competitive pricing in the industry. European shares are also higher, with the Euro Stoxx 600 up 0.3%, making a two-week high. Elsewhere in the commodities market, copper headed for the biggest gain in two months, while oil prices collapse as traders passed rumors that the Egyptian president would step down over the weekend.

Global bond markets are mixed following statements from Trichet and Bernanke. Euro zone spreads, meanwhile, are narrowing after positive Bank of Spain growth estimates, while on the other hand the EU summit is unlikely to bring an agreement on the new rescue mechanism as Germany and France remain divided on the use of EFSF funds. Overall, this week was filled with positive economic data surprises that prompted weakness in bonds, with 10-year gilts up 12 basis points on the week, while despite the less hawkish comments from Trichet’s German 10-year yields gained 8 basis points on the week. Yet this paled in comparison to the 23 basis points that 10-year Treasury yields increased by with the magnitude of US data surprises outstripping that of the G10.

On Friday, the Labor Department released slightly worse than expected Non-farm payrolls, which contrasted to the unemployment rate. The number of jobs created during January of 2011, was 36,000 compared to the 135,000 that was expected by economist. Net job increases over the prior two months was approximately 40,000. The unemployment rate, moved lower to 9.0% compared to 9.4% in the prior month. Economists had expected this rate to tick up to 9.5%. The disparity in the corporate and household survey's is striking and leads one to believe that either boom or bust on the horizon.