Top Story May 12, 2012 – European Union Downgrades Forecasts:
The Impact On U.S. Growth and Concurrent Unemployment Weakness -
Europe doesn’t seem to be getting better anytime soon. The European Union’s own data shows their economy is slowing and it’s possible the member countries will face contagion effects from slow growth with a common currency.
Unemployment in the euro zone is set to rise and this is occurring at the same time when economic data trends in the U.S. are moving below trend, while negative wealth effects from the stock market correction are keeping some investors on the sidelines. The European Commission forecasts published yesterday show the 17 member block nations averaging roughly 11 percent unemployment. The increase year over year is roughly 10 percent and the renewed concerns about political economy issues related to Greek changing its political makeup along with France switching from Zarkozy to Hollande are having a dampening effect on certainty in the region.
It’s A Europe, China, U.S Thing?
Several countries in the euro zone are officially in recession and the headline risk from abroad is heightening, including slowing China GDP growth. To add to the current negative sentiment, the U.S. seems to be slowing its steady pace of growth that seemed to help 2012 begin with good economic data reports and positive forecasts. Jobs growth based on initial jobless claims and monthly government unemployment reports in the last two months have been lackluster. March unemployment decreased by 120,00 while April unemployment levels fell by a slight 115,000 in an economic environment that was due for a snapback.
Retailers have already suffered from European slow growth perceptions in May 2012 ($XRT) and U.S. banks have been labeled after JP Morgan announced it lost $2 billion in 6 weeks on a trade that could get even uglier. We’ve been watching financials along with tech and these sectors are no longer market leaders. Economic fundamentals are mixed and some top stocks haven’t regained strength such as Apple although some claim the overall market is dipping as investors rotate portfolios to leave room short-term for the Facebook IPO.
Stay tuned for technical analysis notes tomorrow.
