What’s the Story?

by CC May 10, 2012 9:07 am • Commentary


New claims for unemployment benefits edged down last week, according to government data on Thursday that could ease concerns the labor market was deteriorating after April’s weak employment growth.

Initial claims for state unemployment benefits slipped 1,000 to a seasonally adjusted 367,000, the Labor Department said. The prior week’s figure was revised up to 368,000 from the previously reported 365,000.

Economists polled by Reuters had forecast claims inching up to 369,000 last week. The four-week moving average for new claims, considered a better measure of labor market trends, fell 5,250 to 379,000.

Coming on the heels of April’s sluggish employment gains, the claims data could calm fears the labor market was stagnating.

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The trade deficit widened more than forecast in March as American demand for crude oil, computers, automobiles and televisions propelled imports to a record.

The gap grew 14 percent to $51.8 billion, the Commerce Department reported in Washington today. The median estimate of economists surveyed by Bloomberg News called for an increase to $50 billion. A 5.2 percent jump in imports, the biggest in more than a year, swamped the 2.9 percent gain in exports, which also reached a record.

The pickup in the value of imports reflected higher fuel prices and a bounce back in shipments from China following the week-long Lunar New Year celebrations amid increasing consumer spending. Sales by American companies to counterparts in Mexico, the European Union and South Korea reached the highest ever, giving no indication of a slowdown in global demand.


On the downside for the euro: Investors have pulled nearly $15 billion from European stock funds since the start of the year, according to data from EPFR Global. That overwhelms the almost $4 billion that has gone into European bond funds, and the disparity exerts downward pressure on the euro.

On the other side of that equation: European banks have been buying euros as they shed overseas assets and bring money home to meet capital demands from regulators.

There has also been euro buying from government-sector investors, such as sovereign-wealth funds, looking to diversify portfolios out of accumulated U.S. dollars, market watchers say.

Asian reserve managers, in particular, are on a long-term path to diversify holdings away from dollars, says Richard Driver, a currency analyst at Caxton FX in London. That often means buying euros. “There’s a lack of really attractive alternatives,” Mr. Driver says.

There was similar support in 2011. “A lot of it is sovereign investors and central banks,” Mr. Robinson says. “It’s a constant weight on the dollar and strengthens the euro.”

Many of the sellers of weak euro-zone government bonds are putting cash into stronger euro-zone government bonds. That is, they are moving money out of, say, Italian bonds, and into Germany bunds. While those moves are significant, they don’t involve sales out of the euro.

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EIA weekly natural gas storage report (10:30): total working gas in storage seen rising to 2.6 billion Bcf from 2.57 billion.

Couple of Fed speakers on the docket, including the Big Kahuna himself. Chairman Ben Bernanke and Charles Evans will be speaking at the Chicago Fed conference. Minneapolis Fed president Narayana Kocherlakota speaks at 11 a.m.

Lastly, the Treasury’s auctioning off 30-year bonds tomorrow. Results are usually out around 1 p.m.


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