European summit: It's time for your close-up, Angela
Investors will focus on the European summit in Brussels at the end of the week. Yes, we are still talking about Europe. Fiscal union and tighter controls will be the main topics, as the wealthier nations (read: Germany) try to extract a pound of flesh in exchange for a full-fledged bailout of weaker nations.
Despite the brouhaha about the U.S. jobs report (more on that below), the stock market-moving news last week was all about Europe and the coordinated central bank action to attack one of the symptoms of the European contagion --liquidity for European banks. Sure, the action could be called a "band-aid," but it could also be seen as the necessary preparation for the major procedure that is required to treat the ailing patient.
Recent comments from German Chancellor Angela Merkel may give a clue as to what we can expect that procedure to involve. There is talk of an amendment to the EU treaty that would create fiscal rules that are legally enforceable through the European Court of Justice and include automatic sanctions for those who do not comply -- hear that, Greece? Once the rules are in place, the European Central Bank would finally pull out the bazooka and use it by issuing Euro Bonds; cutting interest rates; lending to the IMF...basically throwing as much money at the problem as is necessary.
Economists have been saying that to solve the European crisis, Germany would have to come down from its moral high horse and admit it has far too much to lose if the EU were to implode. Last week, Merkel's comments, along with the central bank action, were seen as positive developments towards that end. To wit, stocks were up 7 percent, the strongest weekly performance since 2009.
-- DJIA: 12,019, up 7% on week, up 3.8% YTD (biggest weekly percentage gain since 7/09)
-- S&P 500: 1244, up 7.4% on week, down 1% YTD (biggest weekly percentage gain since 3/09)
-- NASDAQ: 2626, up 7.6% on week, down 1% YTD
-- January Crude Oil: $100.96, up 4.3% on week
-- February Gold: $ 1751.30, down 3.6% on the week
-- AAA National Average Price for Gallon of Regular Gas: $3.28
-- Total bank failures for 2011 = 90 (0 new bank failures over weekend)
FACTOIDS OF THE WEEK: November Employment Edition
-- Jobs created: +120,000 (October and September revised up by 72,000)
-- Private sector jobs created: +140,000 (from +104,000 in October)
-- Government: -20K (Nearly 550,000 total government jobs lost since peak in September 2008)
-- Unemployment rate: 8.6 percent (lowest rate since March, 2009)
-- Under-employment rate (marginally-attached, part-time): 15.6 percent (from 16.2 percent last month, but in 2007, the rate was only 8 percent)
-- Total number of unemployed: 13.3 million (from 13.9 million)
-- Average monthly jobs gained in 2011: 131,000
-- Average monthly private sector jobs gained in 2011: 156,000
-- Total jobs Lost since beginning of recession in 2007: 6.2 million
-- Long-term unemployed (jobless for 27 weeks and over): 5.7 million, representing 43 percent of the total unemployed (the lowest number since Oct 2009)
-- Average duration of unemployment: 40.9 weeks, the highest on record
-- Average workweek: 34.3 (unchanged)
-- Average Hourly Earnings: down $0.2 to $23.18 (over past year, earnings up 1.8 percent)
-- Only 7 percent of those who lost jobs after the financial crisis have recovered their income and standard of living (NYT).
IN THE WEEK AHEAD: Investors will have only a few U.S. economic reports to distract them from the events in Europe. Factory orders and an update from the service sector will be followed by monthly updates on consumer credit and sentiment.
Mon 12/5:
10:00 Factory orders
10:00 ISM Non-manufacturing index
Tues 12/6:
Q3 euro-zone GDP
Weds 12/7:
The Greek Parliament votes on 2012 budget
3:00 Consumer credit
Thurs 12/8:
EU Summit begins with informal dinner
BoE and ECB announcement on rates
8:30 Weekly jobless claims
Fri 12/9:
EU Summit
8:30 International trade
9:55 Consumer sentiment