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Good and bad equities. Good and bad employment

| Posted by: Paul Donovan | Tags: Paul Donovan

  • China's authorities have suspended their policy of suspending equity trading (on the rather good grounds that it did not appear to be working). This does not necessarily mean that market intervention has been abandoned – it may just be more subtle.
  • It is worth remembering that a rising equity market is not "good" and a falling equity market is not "bad" economically. A fairly priced equity market is what is "good". For economists, recent currency moves are probably more important (IF those moves are passed on).
  • Comments from the Fed this week have continued to stress the idea of more rate hikes ahead. The tone of the economic data has also been generally positive. Today's employment report is likely to paint a picture of OK job creation in aggregate.
  • Markets do still place too much emphasis on the importance of the employment report. Labour markets are more complex than a single payrolls change number. Our recent Nobel Perspectives series looked at this via the work of Prof. Pissarides – see Nobel Perspectives - via YouTube or www.ubs.com/nobel