US Non-Farm Payroll

Again we are back to the optimism, markets along with analysts believe that a recovery will be seen later this year, believing that the fourth quarter contraction will be the worst to come as the ongoing support and interventions from governments might cushion economies from

more destruction.

Indices boosted by the slender optimism which diffused in markets yesterday, the S&P 500 inclined 0.34% or 3.08 points reaching 909.73 levels, NASDAQ composite inclined 1.12% or 17.95 points reaching 1617.01 levels, yet Dow Jones Industrial average lost 0.31% or 27.24 points reaching 8742.46 levels.

But all this optimism might be wiped out later on today as markets are waiting for the majors market mover which is the US Non-Farm Payroll, expectations clears out that more job termination took place in December due to the weakening global demand and the intensified Credit Crisis.

It’s been a whole year of termination; all sectors of the economy along with the financial institutions that were obligated to file for bankruptcy had resulted in escalating the unemployment rates in the United States. But it did not really stop at the financial sector in December two of the largest US car manufacturers were on the brink of officially admitting that they have no money to keep functioning, which made them terminate a portion of workers just to ease down their expenses.

General Motors and Chrysler faced a harsh month in December, which obligated them to run for the congress in order to ask them for a bailout to keep them going, yet the bailout was stamped with disapproval by the senates saying that they can’t keep on bailing out all the huge companies in the States.

Markets got struck with the disapproval where the Bush administration had to move fast just to prevent a second fallout after Lehman Brothers that slipped all the confidence out from the markets leaving the stocks markets with huge losses. Bush agreed to give them a total of 17.8 billion dollars yet on one condition that before 31st of March 2009 the two companies must be ready with a restructuring plan, or they have to give back the money.

Due to the stunning harsh times the economy lived in expectations of the non-farm payroll varies, the range falls between lowest -750 terminated job to the highest -350 thousand job; pessimist analysts believe that the weakness seen in the past month managed to create more job terminations yet the optimist say that the worse is almost over.

Paulson the US treasury secretary was considered the most powerful official where he tried his best in salvaging the economy with the 700 billion dollars plan; he prevented some fallout by purchasing preferred stocks in various financial institutions reaching to more than 170 companies, in addition to bailing out the largest banks such as Citigroup, yet he did not really achieve in restoring backing the long lost confidence which made most indices across the world to close the prior years trading with more than 40% of losses.

With the fear taking place in markets, future indices fell 15 points reaching 8681 levels, along with the S&P 500 falling 0.70 point reaching 906.00 levels and NASDAQ fell 1.00 points reaching 1248.50. Also the hesitation was seen in the Asian markets, the Japanese Nikkei Index lost 0.45% or 39.62 point reaching 8836.80 levels and Hang Seng index lost 0.63% or 91.85 points reaching 14323.34 levels.

But before we see the Non Farm Payroll reading markets will see some other fundamentals from the European Continent which will continue to clear out that economies are still struggling with the falling demand levels in addition to the rapid fall in inflationary pressures.

We will start with the Royal Producer Prices, the input prices eased to 3.0% in December from the previous 7.5%, the monthly input climbed slightly to -2.0% from the previous -3.3%, the output prices fell 0.6% on the month easing to 4.0% on the year, also the core PPI reading fell 0.2% on the month with the yearly core output easing down to 4.7% from the previous 5.1%.

The fall in commodity prices and the dropping demand pressured prices to fall down, where crude prices fell from the all time high which was recorded last year to close at $42.00 per barrel, easing down the elevated energy bills which was seen earlier in the prior year.

Its not just prices or inflation, the housing sector in the United Kingdom is still under huge pressures, where now the Central bank must start considering a new intervention just to buy some homes in order to salvage the left over from the falling financial sector.

The situation remains gloomy and the economies no longer can survive this harsh downfall in demand levels which are threatening them with a bigger demon which is known by deflation, based on those fears central banks are heading now toward a zero interest rates policy in order to revive back their economies.

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