Investors Wait on Word From ECB
- Sep 06, 2012
Last week, investors seemed to pause while they were waiting for Fed chairman Ben Bernanke to speak some magical words. This week, the markets seem to be stuck in neutral waiting for ECB president Mario Draghi to outline his central bank’s plan to “save the euro,” to put it in (overly) dramatic terms. But what is Draghi going to say on Thursday?
He did tell the European Parliament this week, using standard central banker vagueness, that the ECB needs to “intervene” in the bond markets to keep the euro zone from going even more FUBAR than it already is. The devil will naturally be in the details of whatever plan he unveils, and at least one report has it that the ECB will commit to unlimited bond purchases, albeit sterilized ones. That means that the central bank will have to sell the same amount of bonds as it buys, for a net QE of zero—something the Federal Reserve decidedly didn’t commit to in the early days of the Panic of 2008, or later for that matter.
For now, investors seem to think some good will come of Draghi’s pronouncements. Yields on 10-year Spanish bonds dropped 16 basis points on Wednesday to 6.41 percent—still high, not as high as in more nervous days earlier this summer. Italian bond yields were also down a bit, oil was up, and U.S. Treasury yields rose a bit.
Labor productivity up
U.S. worker productivity, which has generally been increasing since the beginning of the Great Recession, continued to improve in the second quarter of 2012, according to the Bureau of Labor Statistics. Labor productivity increased at a 2.2 percent annualized rate during the quarter. The increase in productivity reflects increases of 2.4 percent in output and 0.1 percent in hours worked.
Manufacturing sector productivity rose 0.1 percent in the second quarter of 2012, as output grew 1.5 percent and hours worked increased 1.4 percent. The reason productivity grew so little was because of the contrast between durable goods, which saw an increase in productivity of 3.7 percent during the quarter, and the nondurable goods sector, which experienced a decrease of 3.8 percent in 2Q12.
Labor costs increased 1.5 percent in the second quarter of 2012, while hourly compensation increased 3.7 percent, the BLS added. Labor costs have risen 0.9 percent over the last four quarters. Labor costs in manufacturing rose 0.8 percent in the second quarter of 2012, but were down 2.4 percent from the same quarter a year ago.
Residential asking prices up
Yet another indication that the housing market has some momentum: residential data specialist Trulia reported on Wednesday that asking prices on for-sale homes—which lead sales prices by about two or more months—increased 2.3 percent in August year-over-year and rose in 68 of the 100 largest U.S. metros. Month-over-month asking prices rose by 0.8 percent, the seventh consecutive month of increases.
Wall Street seemed to be waiting for word from Europe as well on Wednesday. The Dow Jones Industrial Average was up 11.54, or a meager 0.09 percent, while the S&P 500 lost a meager 0.11 percent. The Nasdaq broke even.