Equity markets are in the red across the globe as investors become increasingly concerned that the Greek debt tragedy could spread to other countries in the euro zone.
In the US futures are sharply lower. The Dow looks to open 48 points lower to 10,193 while futures on the S&P 500 are off 5.90 points to 1,090.50.
“The US$ index is stronger this morning, as the mood is definitely ‘risk off’ with global equity markets selling off,” said Benjamin Reitzes from BMO. “The major currencies are all weaker against the greenback, except the yen which is also benefiting from the shift away from risk.”
Commodities are also clearly heading downwards. WTI Crude oil down 71 cents to $76.27 per barrel and Spot Gold is trading $6.17 lower to $1,103.63.
Key Events Today:
8:30 ― The Jobless Claims report has been disappointing recently as the four-week moving average has actually gone up for the past two weeks, most recently by 9,500 to 456,250. Initial claims averaged 456k in the past four weeks, only 4k lower than the 460k in December. Earlier the downtrend had been much clearer, as seen by recent monthly averages: 481k in November, 524k in October, and 549k in September.
“This stubbornness suggests that the growth in payrolls will have a hard time moving to (and staying in) positive territory any time soon,” said Michael Gregory from BMO Capital Markets.
A sustained pace below 400k is consistent with overall labor growth in the economy.
Economists from Nomura explain that recent data has been unreliable: “Initial jobless claims took a surprising turn in mid-January when an under-staffed processing center in California belatedly filed claims that built up over the holiday season.”
Going forward they expect the distortion “to gradually fade from the data, with claims falling by 10-15k per week over the next few weeks.”
8:30 ― With GDP rising nearly 6% in the final quarter of the year, it should be no surprise that that Q4 Productivity & Costs report is expected to show productivity rising 7.0%, with some estimates looking for a figure as high as 8.1% ― the rate seen in Q3. Unit Labor Costs, meanwhile, are set to decrease 3.8% following a 2.5% cutback in Q3.
“As demand rises, businesses are taking advantage of their existing labor force to handle the additional inflow, rather than hiring new workers, thus increasing productivity,” said economists from BBVA. “Furthermore, the productivity growth is helping to keep labor cost low, which is one of the assumptions behind our baseline expectation of low core inflation in 2010.”
Economists from IHS Global Insight that the prior two quarters have seen spectacular productivity gains, but those rates won’t be sustainable as labor growth returns to the market.
“While these spectacular increases are cyclical, they are stronger than what we have seen in previous recoveries,” they said. “Going forward, productivity will decelerate significantly as companies ramp up their hiring. The strong productivity reading will result in labor costs falling 4.8%”
8:30 ― The seldom-noticed Factory Orders report is expected to rise 0.3% in December after posting a 1.1% gain in November. Estimates are based on the durable goods report which saw a 0.3% increase.
“Non-durable inventories could be a source of revisions to Q4 GDP growth,” said analysts from Nomura.
No Treasury Auctions today.
