The US senate passed legislation yesterday to allow companies to seek compensation due to the USA administration’s perception that the weak Yuan is hurting the USA’s ability to export. Imported Chinese goods are also apparently costing too much due to the value of the Yuan. Would this include goods from Apple, such as the iPhone, manufactured in China in factories with appalling health and safety records and paying monthly wages that your average American kids would sneer at for selling lemonade in their front gardens on a sunny weekend?
This is the same Apple, the darling of USA corporate culture, that’s amassed a $75 billion war chest who manages to create circa 14,000 USA jobs, mainly in R&D, marketing and top management and another 41,000 overseas (mainly China) concentrated mainly on using cheap labour for the assembly of the product. Difficult to see, in that ‘shining’ example, how China’s ‘leverage’ is hurting the USA. Unless the thought is that Apple products could be cheaper if they hadn’t amassed a ridiculous war chest by over charging for their over rated hyped products, whilst directly and indirectly paying Chinese workers relative peanuts. The Senate’s care, consideration and protectionism only extends to USA corporate interests and USA jobs obviously. This is a senate apparently so concerned with regards to US jobs and commerce that blocks Obama’s $470 billion jobs bill on the same day as passing its ‘China’ motion.
As reporting season began with Alcoa’s disappointing report the top U.S. aluminium maker blamed the economic slowdown hurting demand and pushing metal prices lower for it missing forecasts. The firm’s CEO Klaus Kleinfeld warned of weak economic conditions through the year, particularly in Europe, “as confidence in the global recovery faded.”
JPMorgan Chase & Co. is quietly leaking suggestions that its profit slid 10 percent in the third quarter, the biggest drop in more than two years, as Europe’s credit crisis and the U.S. debt-ceiling debate hurt optimism for an economic recovery. Tomorrow’s report from the New York-based bank will probably show earnings of $3.96 billion, according to the average estimate of 18 analysts surveyed by Bloomberg. That compares with $4.42 billion a year earlier and $5.43 billion in the three months ended June 30. JPMorgan, the first of the major U.S. banks to report third-quarter earnings, will be a barometer for the rest of the industry and the broader U.S. economy. The bank, whose $2.25 trillion in assets as of June 30 makes it second to Bank of America is regarded as “the safe play” for investors in the banking sector.
U.S. Treasury Secretary Timothy F. Geithner has once again waded into the Eurozone debate stating that in his opinion European leaders must go beyond a planned recapitalization of banks to resolve the continent’s sovereign debt crisis. Interviewed on Bloomberg television he said;
The most important problem is they have to make sure that the major economies of Europe that are under pressure now are able to borrow at affordable rates. They recognise the need to do more than they’ve done so far. They are moving but they have some ways to go. You saw the president of France, the president of Germany make some very promising, very encouraging statements. The Europeans recognise they need to put in place a much more substantial, much more powerful response if they are going to achieve their objectives, which is helping countries reform by making sure they have enough oxygen that they can get through this.
Worrying European news and data is not isolated to the Eurozone specifically, U.K. unemployment rose to the highest level in fifteen years in the three months through to August. The jobless rate increased to 8.1 percent from 7.9 percent in the three months through July, the Office for National Statistics reported today. The number of unemployed increased to 2.57 million, the most since 1994. In September, jobless claims rose for a seventh month. The number of people in employment fell 178,000 in the three months through August, the most since the quarter through July 2009.
In September, jobless-benefit claims increased 17,500, the statistics office said. Economists had forecast an increase of 24,000, according to the median of 23 estimates in a Bloomberg News survey. The claimant count rate rose to 5 percent, the highest since January 2010, from 4.9 percent in August. In the three months through August, youth unemployment increased to a 991,000, the highest since records began in 1992. The jobless rate in that category was 21.3 percent.
The euro has approached a three-week high versus the dollar before European Commission President Jose Barroso presents his proposals on bank recapitalization after Germany and France pledged to draw up a plan by early November. The euro has strengthened versus yen and sterling in morning trade but fallen sharply versus the Swissy. Sterling has also move sharply higher versus the US dollar and yen but fallen versus the Swissy. The dollar has fallen sharply versus most of the major currencies.
Asian markets experienced mixed fortunes in overnight and early morning trade. The Nikkei closed down 0.4%, the Hang Seng closed up 1.04% and the CSI closed up 3.63%. European markets have risen on the back of the overall Eurozone solution beginning to take shape. The STOXX is up 0.62%, the FTSE is up 0.09%, the CAC is up 0.64% and the DAX is up 1.04%. The SPX daily index future is currently up circa 1.2%. Brent crude is up $43 a barrel and gold up $20 an ounce.
Economic data releases to be mindful of on or after NY opening include the USA jobs report. A Bloomberg survey forecasts fairly static numbers. Initial Jobless Claims of 405K. A similar survey predicts 3710K for continuing claims.