Eurozone Unemployment Falls

January 16, 2018

Eurozone Unemployment Falls

Eurozone unemployment has fallen to its lowest level for nine years. The jobless rate in the single currency area fell to 8.7% in November from 8.8% in the previous month and down from 9.6% the beginning of the year. Furthermore, overall economic growth from the region is expected to have exceeded expectations during the full year 2017 following exceptionally strong industrial output figures for November. This has prompted the European Central Bank to signal that it may move to reduce its exceptional monetary stimulus sooner than previously suggested. As a result, the Euro strengthened more than 2% against the dollar following the announcement, as traders anticipated higher interest rates in the future.

 

US Bonds Selloff

A jump in US government bond yields last week has prompted several prominent investors to warn that the over 30 year Bull Run in fixed income has finally come to an end. While the initial sharp rise in yields has not caused a widespread selloff, it may be prompting potential investors to consider if buying long duration government bonds at current levels is the right decision. The tightening of monetary policy by the Federal Reserve and importantly the unwinding of the quantitative easing programme is expected to deliver upward pressure on bond yields going forward. The potential implications of higher government bond yields on the wider financial system and other asset classes are unclear, and much will depend on the speed at which any increases occur.

 

Carillion goes into liquidation

The UK construction giant Carillion is to go into liquidation following the failure of the company to come to an agreement with its lenders. The company has run into trouble as a result of losing money on several of its large contracts, accumulating large debts and its £600m pension deficit. While the company is a large direct employer as well as employing the services of many smaller companies, the government has allowed the company to liquidate rather than bailing it out. This has been an important move to show large companies that they are not indispensable and avoid the moral hazard of executives and investors. Creative destruction is an important part of a capitalist economy where inefficient companies are allowed to fail, hopefully making way for more dynamic and innovative ones which will improve the productivity of its workers and enhance global competitiveness.

 

Market Data

Index Open Close Change % Change
FTSE 100 7724 7778 54 0.70%
S&P 500 2743 2786 43 1.57%
Dax 13319 13245 -74 -0.56%
Cac 40 5470 5517 47 0.86%
Nikkei 225 23506 23653 147 0.63%
UK 10 Year Gilt Yield 1.25 1.34 0.09 7.20%