June 26, 2013 Update

DJIA:14,760 S&P 500:1,588 NASDAQ:3,348 Gold:$1,224 Oil:$94.81 EURO:$1.30 YEN:97.51

On European Unemployment

Unemployment is a dangerous systemic risk. Not having a job not only negatively impacts the person without the steady income, but also places strains on the people the income supports. In fact, it is believed that only a 25% unemployment rate is high enough to have an effect on a country’s entire population! As of today, unemployment in Greece is at 26.8%, Portugal is at 17.8%, and Spain is at 27.2%... and growing! Unemployment in these countries have reached the level it was in the US during the Great Depression. Unfortunately, unemployment also has political implications (with the most recent Italian political election as an example). The strong political tie between Germany and France was why a network with a long history of discord and strife was able to mend and form a unionized banking and political system. Germany is pushing for the ECB to control rising inflation while France wants money to continue to print to stimulate the economy. Their contrasting demands are straining their newly mended relationship, which could be devastating for the future of the Eurozone. For a while now, Germany has been the backbone of the entire European economy. But as signs of overheating in Germany come and go, who knows exactly how much longer this will last. Many believe the only reason the US was able to recover from the Great Depression was because of World War II. I hate to think the worst, what will it take for Europe to escape the “new normal” and recover from this mess? 

Domestic News

• Market Update Futures trading higher ahead of GDP report. 
• Fed President Kocherlakota will be appearing in an interview on CNBC at 8:00 to go explain what he meant when he said the central bank was not becoming hawkish.
• The Commerce Department will release Q1 GDP growth at 8:30, the US economy is expected to have grown 2.4%.

International Updates

Australia

• Prime Minister Julia Gillard has lost a Labour Party leadership election to Kevin Rudd, which Gillard beat three years prior.

Asia

• Market Update Markets are mixed, the PBOC’s attempts to soothe investors about vanishing liquidity and Chinese credit crunches are keeping markets in line, but simply smoothing is not enough to result in gain across the board. 
• Career prospects for Chinese officials are closely tied to their region’s economic data, so the motivation to fabricate economic statistics is a major problem according to Caixin Online. 

Europe

• Market Update  Trading higher largely driven by both the rise in treasuries and yesterday’s upbeat US economic data, offsetting fears of tapering. 
• The Gfk survey of German consumer confidence has climber to its highest level in almost six years, rising to 6.8 going into July. Sentiment has been boosted by a strong labor market and substantial wage increases.   

Corporate

• Roche (RHHBF.PK) and AstraZeneca (AZN) have pooled their resources to improve R&D.

Commodities and Forex

• Precious metals are getting hit as investors fear the Fed. Silver has lost a third of its value and is the worst performer in 2013 on the S&P GSCI Spot Index of raw materials. Gold has fallen over 3%, dropping to levels it had last seen in September 2010.
• The FXA is up 55bp vs the USD after the election.