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The Financials Pit Review

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For the week of June 9th, 2008

Wed, Jun 11 2008, 10:09 GMT
by Kalvin O’Brian

Pit Guru

U.S. Economy

WOW! The US Labor Department reported on Friday that the unemployment rate increased from 5% to 5.5% in May, and non farm payrolls were down 49,000 in the same period - not as bad as expected. It was almost comical listening to the house try to blame the increase in unemployment to the amount of teenagers unable to find work. Oh yeah, and I think crude was up a little too.

Friday is over and crude was the story! Today however, at least early in the session, crude seems to be retracing. Undoubtedly being up $11 and hitting a high of $139.12 a barrel did affect the stock market. This morning stocks have already started trying to push higher. It looks to have weathered the blow and started the climb back to 1400. I am going to remain careful and keep close stops. I think it makes sense to everyone in this crude dependant economy that if crude continues up to $150 a barrel as some are estimating the S&P will be trading back at the 1300 levels.

Currencies

The unemployment rate in Canada remained at 6.1% in May with a net increase of 8,400 jobs in May. The last year has shown an increase of 339,000 jobs. High crude is typically a major contributor to a higher Canadian. I expect this market to still remain under the 1.00 mark even if crude climbs to the 140's.

Across the pond U.K. producer prices have increased at the fastest pace in 20 years in May. This just increases the odds the Bank of England will refrain from cutting interest rates even as the economy steers toward a recession. The housing crisis remains a huge concern in the island nation and inflation pressures run a close second. It will be interesting to see how the bank plays this out.

The euro has increased to the strongest level this year versus the yen as well as trading almost at the two-week high against the dollar. As speculation increases, the region's central bank will increase rates as early as next month.

Published on  Wed, Jun 11 2008, 10:15 GMT