AMERIPRISE FINANCIAL, INC.
Greece Casts a Shadow Over Last Week's Strong Economic Data
06/09/2015 | David Joy
The May jobs report bolstered the case of those expecting a September rate increase from the Federal Reserve. A surprisingly robust 280,000 new non-farm jobs were created, bringing the monthly average this year to 217,000 including the weak 119,000 jobs created in March. The unemployment rate rose one tenth to 5.5 percent, but the labor force participation rate rose as well.
After a somewhat tentative start to the second quarter, the latest round of economic data has accelerated. The two remaining pieces of the puzzle are the absent consumer and the failure of wages to pick up in a meaningful way. On Thursday, we will see the May retail sales report, which should go a long way toward clarifying the consumer mindset after a slow start to the year. Also, the jobs report contained some encouraging news on the wage front as average hourly earnings increased by 0.3 percent in May, bringing the year-over-year increase to 2.3 percent (the highest since August 2013).
Despite the strong jobs report stocks limped to the finish on Friday, closing the week with a loss of 0.7 percent, trimming the year-to-date gain to 1.7 percent. Bond yields took note, however. The yield on the ten-year Treasury note spiked ten basis points to 2.41 percent, its highest level since last October. The yield on the two-year note rose five basis points to 0.71 percent, its highest level since March.
The Greek Saga Continues
The deteriorating situation in Greece overshadowed the better data from last week. What looked like progress on a new bailout agreement earlier in the week quickly evolved into a standoff, as both sides rejected the other's proposal, claiming they were unrealistic and unacceptable.
In a procedure that had been used only once before (by Zambia over thirty years ago) the Greek government chose to bundle its payment due to the International Monetary Fund on Friday with three others due later in the month. In a speech to parliament, Greek Prime Minister Tsipras characterized the latest creditor proposal as irrational. How much of that rhetoric is domestic political posturing, or truly reflects a willingness to take the negotiations to the brink, and perhaps over it, will soon become clearer.
The current bailout agreement expires at the end of June. The standoff has taken its toll. After peaking in mid-April with a gain of 22 percent, the EuroStoxx Index has fallen 9.4 percent in euro terms. The backup in bond yields certainly have contributed to the unease, as has the rebound in the euro. After falling to a low yield of 0.08 percent on April 20, down from 0.54 percent to start the year, the yield on the ten-year German bond has shot up to 0.88 percent. And after starting the year at an exchange rate versus the dollar of 1.21, the euro weakened to 1.05 in March. But since April 13, it has strengthened to 1.12.
Stocks Rise in China
On the other side of the globe, in a clear case of bad news really being good news, stocks in China rose 2.2 percent in Monday trading after the government reported that both imports and exports fell more than expected in May. Of course, the hope among investors is that such data will prompt the government to become even more aggressive in its efforts to stimulate the slowing economy. That same thinking has propelled the Shanghai Composite Index to a gain of 59 percent so far on the year.
Important Disclosures:
The views expressed are as of the date given, may change as market or other conditions change, and may differ from views expressed by other Ameriprise Financial associates or affiliates. Actual investments or investment decisions made by Ameriprise Financial and its affiliates, whether for its own account or on behalf of clients, will not necessarily reflect the views expressed. This information is not intended to provide investment advice and does not account for individual investor circumstances. Investment decisions should always be made based on an investor's specific financial needs, objectives, goals, time horizon, and risk tolerance.
The S&P 500 is an index containing the stocks of 500 large-cap corporations, most of which are American. The index is the most notable of the many indices owned and maintained by Standard & Poor's, a division of McGraw-Hill.
The EURO STOXX 50 is a market capitalization-weighted stock index of 50 large, blue-chip European companies operating within eurozone nations. The universe for selection is found within the 18 Dow Jones EURO STOXX Supersector indexes, from which members are ranked by size and placed on a selection list.
The Shanghai Composite Index is a capitalization-weighted index of all stocks on China's Shanghai Stock Exchange.
The Bureau of Labor Statistics is a government agency that produces economic data that reflects the state of the U.S. economy.
Investment products are not federally or FDIC-insured, are not deposits or obligations of, or guaranteed by any financial institution and involve investment risks including possible loss of principal and fluctuation in value.
Ameriprise Financial Services, Inc. Member FINRA and SIPC.
06/09/2015 | David Joy
The May jobs report bolstered the case of those expecting a September rate increase from the Federal Reserve. A surprisingly robust 280,000 new non-farm jobs were created, bringing the monthly average this year to 217,000 including the weak 119,000 jobs created in March. The unemployment rate rose one tenth to 5.5 percent, but the labor force participation rate rose as well.
After a somewhat tentative start to the second quarter, the latest round of economic data has accelerated. The two remaining pieces of the puzzle are the absent consumer and the failure of wages to pick up in a meaningful way. On Thursday, we will see the May retail sales report, which should go a long way toward clarifying the consumer mindset after a slow start to the year. Also, the jobs report contained some encouraging news on the wage front as average hourly earnings increased by 0.3 percent in May, bringing the year-over-year increase to 2.3 percent (the highest since August 2013).
Despite the strong jobs report stocks limped to the finish on Friday, closing the week with a loss of 0.7 percent, trimming the year-to-date gain to 1.7 percent. Bond yields took note, however. The yield on the ten-year Treasury note spiked ten basis points to 2.41 percent, its highest level since last October. The yield on the two-year note rose five basis points to 0.71 percent, its highest level since March.
The Greek Saga Continues
The deteriorating situation in Greece overshadowed the better data from last week. What looked like progress on a new bailout agreement earlier in the week quickly evolved into a standoff, as both sides rejected the other's proposal, claiming they were unrealistic and unacceptable.
In a procedure that had been used only once before (by Zambia over thirty years ago) the Greek government chose to bundle its payment due to the International Monetary Fund on Friday with three others due later in the month. In a speech to parliament, Greek Prime Minister Tsipras characterized the latest creditor proposal as irrational. How much of that rhetoric is domestic political posturing, or truly reflects a willingness to take the negotiations to the brink, and perhaps over it, will soon become clearer.
The current bailout agreement expires at the end of June. The standoff has taken its toll. After peaking in mid-April with a gain of 22 percent, the EuroStoxx Index has fallen 9.4 percent in euro terms. The backup in bond yields certainly have contributed to the unease, as has the rebound in the euro. After falling to a low yield of 0.08 percent on April 20, down from 0.54 percent to start the year, the yield on the ten-year German bond has shot up to 0.88 percent. And after starting the year at an exchange rate versus the dollar of 1.21, the euro weakened to 1.05 in March. But since April 13, it has strengthened to 1.12.
Stocks Rise in China
On the other side of the globe, in a clear case of bad news really being good news, stocks in China rose 2.2 percent in Monday trading after the government reported that both imports and exports fell more than expected in May. Of course, the hope among investors is that such data will prompt the government to become even more aggressive in its efforts to stimulate the slowing economy. That same thinking has propelled the Shanghai Composite Index to a gain of 59 percent so far on the year.
Important Disclosures:
The views expressed are as of the date given, may change as market or other conditions change, and may differ from views expressed by other Ameriprise Financial associates or affiliates. Actual investments or investment decisions made by Ameriprise Financial and its affiliates, whether for its own account or on behalf of clients, will not necessarily reflect the views expressed. This information is not intended to provide investment advice and does not account for individual investor circumstances. Investment decisions should always be made based on an investor's specific financial needs, objectives, goals, time horizon, and risk tolerance.
The S&P 500 is an index containing the stocks of 500 large-cap corporations, most of which are American. The index is the most notable of the many indices owned and maintained by Standard & Poor's, a division of McGraw-Hill.
The EURO STOXX 50 is a market capitalization-weighted stock index of 50 large, blue-chip European companies operating within eurozone nations. The universe for selection is found within the 18 Dow Jones EURO STOXX Supersector indexes, from which members are ranked by size and placed on a selection list.
The Shanghai Composite Index is a capitalization-weighted index of all stocks on China's Shanghai Stock Exchange.
The Bureau of Labor Statistics is a government agency that produces economic data that reflects the state of the U.S. economy.
Investment products are not federally or FDIC-insured, are not deposits or obligations of, or guaranteed by any financial institution and involve investment risks including possible loss of principal and fluctuation in value.
Ameriprise Financial Services, Inc. Member FINRA and SIPC.
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