Economic News: Jobs, ECB, China, Citi
Today's Economic News Review takes up Weekly Jobless Claims Data, ECB Monetary Action, the Treasury Chief's China Tour and the Congressional Inquiry of Citigroup Executives
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Economic News
The day's economic news was keyed by employment data, but international activity played an important part in the day's flow.Weekly Claims increased by 18K in the period ended April 3rd, to 460K, well above the economists' consensus for 436K. The four-week moving average rose 2,250, to 450,250, illustrating a stalling of labor activity in a poor state. The prior week claims figure was also revised higher to 442K. See more on the Jobless Claims Report via our article, "Weekly Jobless Claims."
ECB Monetary Policy
The European Central Bank (ECB) decided today to keep its interest rate on main refinancing operations and the interest rates on the marginal lending facility and the deposit facility unchanged at 1.00%, 1.75% and 0.25% respectively. The inaction was widely anticipated by global markets, given Europe's slower recovering aggregate economy and the troubles of EU component economies in Greece, Ireland, Portugal and Spain.
ECB Chief Jean-Claude Trichet discussed the sluggish economic activity in Europe in Q4, based on Eurostat data, calling it "flat." Mr. Trichet shamelessly attributed some blame to the weather as well. He also noted that HICP Inflation increased to 1.5% in March, up from 0.9% in February, while attributing it to energy and food prices and again noting the weather.
Finally, Trichet declared the ECB's support of the March 25, 26 EU statement regarding Greece. And he noted that all Union nations with excessive deficits should now work toward debt reduction in a manner over and beyond the old rule of law, the Stability & Growth Pact. Keep reading to see why the EU should review it's own reasoning for the Pact.
What the EU Must Do for Greece
Again, I note that Europe is making a huge mistake by demanding great austerity measures on Greece and its ailing economic cousins in the EU. They will strangle Greece's economy in the process, and I see no unity in that. It seems to me the EU demands Greece suffer, or leave the Union, which again is not family-like. I reiterate that the best solution is to loan Greece what it needs, and allow it to effect longer term fiscal policy measures to bring its debt into control at a controlled pace. The EU would be repaid over time, and Greeks would not be put to the fire and the Greek economy placed into an isolated depression.
The Bank of England (BOE) also kept its official Bank Rate paid on commercial bank reserves at 0.5%. The BOE also voted to maintain the stock of asset purchases financed by the issuance of central bank reserves at £200 billion. Unlike the US, Europe and the U.K. cannot yet remove supports to the financial system. European bank lending to the private sector declined again at last check, according to the ECB's release.
Keeping with international news flow, we turn to China. Treasury Secretary Timothy Geithner met in Beijing with Vice Premier Wang Qishan. The meeting was described as a preliminary to next week's meeting of leaders in Washington and the mid-May high level talks scheduled to be held in China. Also, it came after Geithner's Treasury delayed against its April 15 deadline to report to Congress on the currency policies of major US trading partners; some were placing bets on China being labeled a "manipulator." It seems as clear as day that the Administration wanted to avoid adding another coal to the fire, after the Google (Nasdaq: GOOG) mess, Obama's meeting with the Dalai Lama, and a Chinese-despised US arms sale to Taiwan. Congress is heated now, and ready to take on China and its unfair trade practices at precisely the wrong moment. Yours truly was one humble citizen happy to see the Administration act more strategically.
Rumor has it, based on a New York Times report, that China is about ready to effect a managed float of the renminbi. Yuan forwards are indeed trading at about a 3% premium per dollar than the spot rate, reflecting such anticipation.
Prince & Rubin Face Fire
In DC, the Financial Crisis Inquiry Commission turned the heated spotlight on former Citigroup (NYSE: C) representatives Charles Prince (former Chairman & CEO) and Robert Rubin (Influential Board Member & Advisor). Prince expressed his regret, and apologized for failing to see the crisis coming. Rubin said he did not know until it was too late, despite yesterday's testimony of a man who said he emailed Rubin his concerns. Rubin said it was acted on promptly, and that Board members do not have the kind of power the Congressmen wanted to attribute them (which is true). It would not be the first time a Congressional committee member was ignorant of how things work in the private business sector. Any C-SPAN fan can tell you that!
Still, Citi lost its shareholders billions in market capitalization, the remainder of which was diluted to vapor. Citi also cost American taxpayers some $45 billion in its bailout. When the Congressmen reached for constituent support by criticising the Citi execs' compensation, Mr. Prince pointed out that a great portion of his net worth was still in Citigroup stock, which nearly dissipated into the nothingness. I'm feeling his pain, but he still lives in Palm Beach let's not forget...
Mr. Rubin has always been someone "The Greek" has admired (a reader of WSG), even trading a few emails from time to time. The Obama Administration as well, places Robert Rubin in high esteem. Where most of us went wrong was in trusting the rating agencies to rate securities properly, and we cannot blame others for that. The CEOs of the banks, though, that's another story. They should have known.
This article should interest investors in NYSE: C, NYSE: JPM, NYSE: MS, NYSE: GS, NYSE: BAC, NYSE: FNM, NYSE: FRE, NYSE: AIG, NYSE: TD, NYSE: PNC, NYSE: WFC, NYSE: DIA, NYSE: SPY, Nasdaq: QQQQ, NYSE: DOG, NYSE: SDS, NYSE: QLD.
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