Morning Stuff

Your economy has been stuck in the mud for 20 yr’s, your central bank has had rates near zero for 15 years and has printed enormous amounts of money thru QE, your population is shrinking and your political system is dysfunctional but as long as you have a trade surplus and can finance your debts and deficits internally you have enough for a strong currency. The above is of course Japan and the yen is rallying to just shy of its highest level since 1995 vs the US$. With fiscal restraint in Europe helping the euro and pound of late, the US$ index is approaching again the key 80 level. If the Fed at their Aug 10 meeting says they will reinvest maturing securities into buying more MBS and Treasuries, that 80 level will be broken and the Fed will continue their long term history of destroying the purchasing power of the US$. ABC confidence fell 2 pts to -50, matching the lowest since Oct ’09 and we’ll see if that’s a hint to weak job data this week.

ADP said 42k private sector jobs were added in July, 12k more than expected and June was revised up by 6k to 19k. The gains were led by small and medium sized businesses as large co’s added no net workers. The driver was specifically in services as that sector added 63k net jobs, offsetting a 21k fall in the goods producing sector, 6k of which was in manufacturing. Construction shed 17k jobs, the smallest drop since Nov ’07 and the financial services area lost just 1k jobs, the smallest decline since June ’07. Bottom line, while better than expected, the ADP report still reflects a sluggish pace of hiring. In the ADP data, private sector job adds are averaging 37k over the past 6 months compared with an average of 105k in the jobs recovery in mid 2003.

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