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ECB to End Bond Buybacks, Jobless Claims Drop to 206K

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Thursday, December 13, 2018

Ahead of the opening trading bell this morning, Mario Draghi, President of the European Central Bank (ECB), is giving a news conference regarding bringing an end to the central bank’s bond-buying policy by the end of this month. This program was much like the U.S. version that helped wade us through the financial crisis that began a decade ago. With this announcement, Draghi included some basis for the bank’s decision:

He said the ECB is cutting its growth forecasts, expecting slower growth momentum ahead. Draghi mentioned that the central bank would still be ready to make needed adjustments to the Eurozone economy, but right now, even with incoming data weaker than expected — attributed to uncertainties regarding economic protectionism in some regions, and potential volatility in emerging markets — the ending of the bank’s Quantitative Easing (QE) program will go on as expected.

Further, Draghi said the bank won’t increase rates; in fact, he said there has been no change in overall outlook for the Eurozone. He did mention seeing inflation pressures gradually rising, but that the balance of risks has moved to the downside. The euro has risen in value upon the speech, and we see futures in the U.S. up again a half hour prior to the market open.

Being Thursday, we also see new Initial Jobless Claims, which fell precipitously from a slightly adjusted 233K reported last week to 206K today. This is back to pre-hurricane summer levels, when jobless claims fell to near-50-year lows and stayed there. For the past few weeks, we’d gotten up out of that 200-225K range, but not anywhere near stress levels regarding the labor market.

Continuing Claims ticks up a tad to 1.66 million from the 1.64 million in last week’s report, but these are phenomenally low claims numbers. These reads have been consistently in the 1.65-1.75 million long-term unemployment claims, even when the weekly numbers jumped up a bit recently.

Finally, Import and Export Prices for November hit the tape ahead of regular trading today: -1.6% on the Import side was lower than the -1.2% analysts had been expecting. Subtracting volatile petrol prices, this figure reaches -0.3%, which is unchanged from expectations. Exports hit -0.9% on the headline and -1.8% year over year. Imports got to 1.7% year over year.

Basically, what this data shows — or doesn’t show that some analysts expected to see — is that there are apparently no tariff affects in Import/Export prices currently. Clearly we’d see notable spikes up into the positive if we had seen tariffs asserting themselves in global trade, and the “trade war” with China — again supposedly with better traction toward an agreement this week, which has helped markets grow more buoyant — had begun back in October. Just when might these figures augment our current bottom lines? That remains to be seen.

Mark Vickery
Senior Editor

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