Today's US payroll figures were ugly by any measure, with the reported
loss of 240,000 jobs slightly worse than expected. The worse data point
to come out today was actually the downwards revision to Septembers
payroll figures. Today's revision pushed September payrolls down from
-159,000 to -284,000. This means that so far in 2008, around 1 million
jobs have been lost, most of these have been in the financial sector but
the slump is prevalent in virtually every US sector.
On the face of it, it is perhaps surprising to see equity markets
rebound so strongly especially in the face of accelerating unemployment
in the world's biggest economy. However, the reality is that financial
markets are forward looking which means that most of the time the bad
news is already taken into account. Today's payroll figures could have
been even worse than they were and judging by the rebound we're seeing,
a significant part of the falls on Wednesday and Thursday may have been
traders rushing in to sell ahead of today's numbers. The net result is
that the two day sell off appears to have overshot slightly.
On the credit markets, libor and credit default swaps continue to
improve for the worlds largest financial firms. The cost of insuring
against companies defaulting on their debt is still very high by
historical standards, but they have still come down a long way in the
last few weeks. Morgan Stanley and Goldman Sachs still remain a concern
while the UK's HSBC currently has the lowest CDS of the remaining major
independent banks and brokers. In short, things have most certainly
improved since the dark days of October, but there is a long way to go
before we can say safely say that this credit crisis is over.
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