Unemployment, Retail Sales and Optimism in the EU

­­Our Two Cents – Week of 1/9/12

With the first week of 2012 crossed off the calendar and the Iowa caucus in the past, the one word to describe the start of January—especially in the United States and European financial markets—is optimism.

The U.S. economy added 200,000 jobs, and its unemployment rate fell to 8.5 percent in December (from 8.7 percent in November). These figures paint an initially positive scene that the long-awaited economic recovery is finally making some positive strides. This good news comes on the heels of news earlier in the week about weekly jobless claims which have dropped to 372,000. Even though the holidays have passed, retailers and the economy also unwrapped a nice financial present. According to the International Council of Shopping Centers’ tally of 25 retailers, sellers collectively reported a 3.5-percent increase in monthly revenue at stores open at least a year. For November and December, retailers saw holiday sales increase 3.3 percent. While consumers were purchasing, hedge funds were gaining. In November, hedge funds raked in $3.6 billion in new money, according to BarclayHedge and TrimTabs Investment Research. Also, investors are confident about the 2012 hedge fund outlook, especially after they experienced a rough 2011.

In Europe, the markets rallied early last week, showing early signs of optimism after the previous year that saw economic chaos. To start 2012, Germany successfully auctioned its bond issuance by selling its 10-year benchmark bund. The nation sold $5.28 billion of the 2-percent January 2022 bund, its current 10-year benchmark paper, with bids reaching $6.52 billion. Successful bonds also found their way to the United Kingdom. British bond experts say U.K. government bonds—seeing record lows at the end of 2011—will remain as safe-haven assets, especially because the euro zone crisis hasn’t been solved. Experts say investors will continue to turn to U.K. government bonds because the country is able to control its currency and enact a monetary policy stimulus if needed.




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