European Unemployment Drags on World Markets

tokyo japan Nikkei electronic board world stock markets
Shuji Kajiyama/AP

BANGKOK -- World stock markets slumped Friday after a report showed unemployment hitting an all-time high across the 17 European Union countries that use the euro.

Wall Street also appeared headed for losses. Dow Jones industrial (^DJI) futures shed 0.5 percent to 15,237. S&P 500 (^GSPC) futures dropped 0.6 percent to 1,643.40.

Eurostat, the EU's statistics office, said Friday that unemployment rose to 12.2 percent in April from the previous record of 12.1 percent the month before.

European stocks fell in early trading. Britain's FTSE 100 fell 0.9 percent to 6,599.76. Germany's DAX lost 0.9 percent to 8,323.05. France's CAC-40 declined 1.1 percent to 3,952.50.

The dour European jobs figures came on top of lackluster U.S. economic reports Thursday that raised expectations the Federal Reserve will stick to its aggressive stimulus policies.

U.S. unemployment claims rose and first-quarter growth was revised lower, which in a perverse turn of events was encouraging for some investors who want to see the Fed continue its mammoth purchases of government bonds to support the U.S. economy.

The Fed's $85 billion-a-month purchases are aimed at keeping interest rates low to spur borrowing and investment. The efforts have boosted stock markets, where investors have turned for returns beyond what bonds are paying.

Asian stocks were mostly lower, although Japan's Nikkei 225 closed 1.4 percent higher at 13,774.54 after shedding more than 5 percent the previous day. South Korea's Kospi advanced 0.1 percent to 2,001.05. Australia's S&P/ASX fell 0.1 percent to 4,926.60. Benchmarks in New Zealand and the Philippines rose.

Hong Kong's Hang Seng fell 0.4 percent to 22,392.16. Benchmarks in Indonesia and Singapore fell.

On Thursday, U.S. economic growth in the first quarter was lowered to an annualized rate of 2.4 percent from 2.5 percent while weekly jobless claims rose by 10,000 and pending home sales gained by far less than anticipated in April.

Most economists think U.S. growth is slowing to around a 2 percent annual rate in the April-June quarter as the economy adjusts to federal spending cuts, higher taxes and further global weakness. Still, many say the decline may not be as severe as once thought. That's because solid hiring, surging home prices and record stock gains should keep consumers spending.

Traders are also keeping an eye on China. Its official manufacturing index for May is to be released on Saturday. A similar survey by HSBC Corp. (HBC) issued last Thursday showed China's manufacturing contracted to a seven-month low of 49.6 from April's 50.4 on a 100-point index. Numbers below 50 show a contraction.

Andrew Sullivan of Kim Eng Securities in Hong Kong said traders were keeping their expectations in check for China, since as a huge exporter it is sensitive to global economic weakness.

"As long as it's not far off the 50 mark, I don't think people will be too worried," Sullivan said of the China manufacturing index.

Benchmark oil for July delivery was down 64 cents to $92.97 per barrel in electronic trading on the New York Mercantile Exchange. The contract rose 48 cents to close at $93.61 a barrel on the Nymex on Thursday.

In currencies, the euro was down at $1.2996 from $1.3043. The dollar fell to 100.40.

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David Hill

The main reason why the EU has such a worrying and a never ending upward trend of people unemployed is because EU leaders and those in Brussels do not understand that for an economic block to excel in the current world markets and those of the future, they will simply have to tap into the creative thoughts of all the 500 million+ European citizens. We have currently an obsession with the elitist thinking that only the few know best but where history shows clearly that this is a complete disaster. All that politicians and bureaucrats think is that if a person has a first class honours degree from our most prestigious universities that they have all the answers. History has shown clearly again that this is not the case. This obsession is based upon our present political and bureaucratic masters and where they have come from this background mindset and where this is a complete fallacy. For in this respect the history of business has shown that wealth is created not through solely intelligence, but through creative thinking. Bill Gates is a prime example here who dropped out of university to set up Microsoft and now the richest person in the world again. Although I am not an admirer of Gates, it shows that suspected sheer brain power is not the answer to get us out of our economic problems. No, that lies in the hands of the masses and tapping into their creative and innovative thinking. For even Bill Gates could not come up with MS-Dos, as he had to buy it for $50,000 from an unknown computer programmer (Tim Paterson). Indeed if he had not done this I doubt that we would have ever heard of Bill Gates. Therefore what the EU should be doing but where they will never learn, is to introduce through the EU27 the creative infrastructure to allow the creative thinking of the EU masses to be unleashed. This is totally different to the business-university model that has failed all EU nations miserably for decades now. Indeed, put this creative infrastructure model in place, costing some €2.50 billion (a small price for future economic dynamism) and we would see unemployment become a thing of the past. Will the elite of the EU do it, I very much doubt it as they are the children of this insane elitist thinking. For in this respect, ‘Elitism’ will be the economic death of us all and with it the EU itself over the next two decades. Mark my words as things are going from bad to worse by the year. China knows this and is content in knowing that our economic block is failing and our living standards are transferring to them. How mad can we really be is the biggest question that we can ask ourselves. Really mad I would say as we cannot see where our greatest strength resides.

Dr David Hill
Chief Executive
World Innovation Foundation

May 31 2013 at 3:29 PM Report abuse rate up rate down Reply