One Minute Macro Update

US:  Markets modestly positive in the early AM.  Yesterday’s claims numbers were roughly in line with expectations and expectations for today’s Payrolls data have been modestly upgraded from the pre-ADP expectations.  ISM showed progress as did Nonfarm Productivity, while Unit Labor Costs indicated the divergence between commodity price inflation and labor price inflation (or lack thereof).  Bernanke’s speech yesterday provided a few great tidbits, including the dovish outlook predicated on the Fed’s expectation of low inflation and high unemployment.  After emphasizing that expectation, the Chairman stated, “Under such conditions, the Federal Reserve would typically ease monetary policy,” via the Fed Funds rate.  Though the statement was seemingly later couched in the context of asset purchases, it does seem like strong language.  For the inflationary hawks – especially those abroad who are concerned with the US ‘exporting inflation’ – the Chairman offered that higher “visible” prices (notably for gas) were results of “very strong demand from fast-growing emerging market economies, coupled, in some cases, with constraints on supply.”  Inflation is apparently someone else’s problem.

Europe:  Today brings the unscheduled but widely anticipated talks on EFSF expansion into bond purchases as well as the “Pact for Competitiveness”.  Headlines are likely to be fast and furious following the scheduled energy summit, which contains only a commitment to find an agreement at next month’s summit.  Early press reports indicate that an expansion/enlargement is in the cards, but with no details on financing.  Yesterday’s commentary from Trichet was decidedly less hawkish/more dovish than expected.  UK Future Inflation December 103.9 v 103.3 prior, a five month high.  UK home prices (Halifax) +0.8% MoM v -0.3%E.  EU harmonized CPI -1.2% MoM v -1.3%E, 2.4% YoY v 2.2%E.

Asia:  RBA outlook very positive as the policymaker noted it would look past the flood impacts and concentrate on the medium term outlook for the economy.  Asia still shut for holiday calendar.

From Brian Yelvington of Knight Capital


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