Skip to main content

Morning Update

From Bloomberg:

"Euro-area unemployment rose to a record and inflation quickened more than economists forecast as rising energy costs threaten to deepen the economic slump.

The jobless rate in the economy of the 17 nations using the euro was 11.3 percent in July, the same as in June after that month’s figure was revised higher, the European Union’s statistics office in Luxembourg said today. That’s the highest since the data series started in 1995. Inflation accelerated to 2.6 percent in August from 2.4 percent in the prior month, an initial estimate showed in a separate report. That’s faster than the 2.5 percent median forecast of 31 economists in a Bloomberg survey."

This latest report out of Europe shows that Europe may have entered a period “stagflation.” That is, both increasing unemployment and increasing inflation. This is a particularly difficult situation for governments and central banks to handle because solving one problem generally makes the other worse.

Today is finally the day the market has been looking forward to for weeks: Ben Bernake’s Jackson Hole speech. At 10 Am EST Bernanke will take the podium to deliver a speech titled “Monetary Policy Since the Crisis.” Ahead of the market open the dollar is weak across the board, with the Euro up nearly 1% against it. Metals are also strong, with Gold +0.50% and silver +1.4%. Traders appear to be positing themselves to profit from further hints of QE3 from Bernanke, which increases downside risk in the market should the speech disappoint.

Comments

Popular posts from this blog

Morning Update

Yesterday JC Penny reported what some are calling “The Worst Quarter in the History of Retail.” The company reported a quarterly loss of $2.51 per shares and that revenue dropped 24.8%. Revenue at stores open for at least a year fell 31.7% and customer traffic dropped 17% last quarter following a 10% decrease in third quarter. Not surprisingly these dismal numbers spurred option traders to make some large bearish bets on the stock. The biggest was the purchase of 30,000 May 16 puts for $1.57 with the stock at 17.50. This trade will be profitable if JCP is below 14.43, 17.5% lower, by May expiration. One of the biggest concerns investors should have in JC Penny’s cash supply. In November they told investors that they would end the year with $1 billion in cash, but ended up with only $930 million. Wednesday they then told investors that they had delayed $85 million in payments to their suppliers until the early part of the first quarter. This is another red flag that the company is run...