Yen Worries, Oil Weighs on USD, Layoffs
Mark Whistler is the founder of www.WallStreetRockStar.com and is the author of multiple books on trading. Mark’s newest book, The Swing Trader’s Bible – co-authored with CNBC/Fox News regular guest Matt McCall – will be on shelves in late summer, 2008. In addition, Mark also writes regularly for TraderDaily.com and Investopedia.com.
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1. Japan Trade Surplus Halved
The News:
Year over year, Japan’s trade surplus was virtually cut in half based on slowing global growth and elevated oil prices.
The Breakdown:
Behind the headlines, we see Japan’s April trade surplus declined 46.3%, year over year as slowing global growth took a massive chunk out of export demands. What’s more, elevated oil (hitting an intraday high of $134.35 a barrel on Wednesday) was the other main catalyst for the dismal report.
Analysts were prepared for a significant reduction in trade surplus; however, most were anticipating the decline to clock in just under 22%. With the surplus slashed over double expectations, the yen found itself under selling pressure across the board.
The Bottom Line:
The Bank of Japan just held rates steady at 0.5%, based on sluggish internal demand and continually weakening global GDP growth. Obviously, the central bank is readily aware of the present scenario within Japan and will most likely not be raising rates anytime soon, given the downside risk to the larger economy. Finally, Japan’s trade balance report will not likely help the yen find any higher ground in the near-term, something traders will want to be aware of.
2. Saudi Arabia to Increase Oil Production
The News:
Saudi Arabia is set to increase oil production 3.3%, or 300,000 barrels a day in June.
The Breakdown:
Oil continues to trade at highs, dogging the U.S. dollar and global economic growth globally. Saudi Arabia has stated that it plans on increasing production 3.3% in June; however, the event will not likely have too much impact on the price of oil.
What’s more, OPEC has stated that it will not convene any meetings, before the regularly scheduled meeting in September. OPEC is clearly raking in money hand over fist right now and enjoying the present state of affairs. Oil is up about 100% over the past year, and just short of 40% since the beginning of this year.
The Bottom Line:
There’s not much standing in the way of higher oil prices right now. $140 is my first capitulation target from this point, though we certainly can’t rule out $150 a barrel either. Higher oil is bearish for the U.S. dollar.
3. Mass Layoffs Decline
The News:
Mass layoffs declined from 157,156 in March to 133,914 in April.
The Breakdown:
Overall, mass payoffs declined in April over March; however, it is important to note that while mass layoffs showed less people losing jobs in April, there were actually more “lay off events.” Lay off events are defined as anytime a company lets go more than 50 workers.
In April, there were 1,272 lay off events, over 1,089 in March.
The Bottom Line:
Thursday’s data indicated many larger companies have already executed planned layoffs; however, smaller companies are now going through the same gauntlet. While mass lay off numbers showed a slight sign of improvement in April, the U.S. economies – and workers – are not out of the woods just yet.