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Economic growth estimates slip. Problems grow in Europe and Asia.

The major averages surged at the open on a much better than expected employment report, entering the final hour with substantial gains.  Since Tuesday the NASDAQ is up 114 points or 2.4% while the Standard and Poors 500 Index has gained 32 points or 1.5%.

June saw the creation of a very impressive 287,000 new jobs, 112,000 more than expected.  The unemployment rate increased to 4.9% as the labor force participation rate gained .1% to 62.7%.  Average weekly hours remained the same at 34.4 but average wages increased again up 4 cents to $21.51.  Previous months job gains were revised down by 6,000 with May showing just 11,000 new jobs.  So while the June total is impressive the average is a lot less so at 147,000 new jobs per month in the 2nd quarter.

The latest estimate of 2nd quarter GDP or Gross Domestic Product growth by the Atlanta Feds GDP Now model slipped fractionally to 2.4%.  Also of note, recession odds are increasing, while higher interest rate odds are decreasing.

Over in Europe, Portugal tries to quietly control a banking crisis post Brexit, the STOXX Euro 600 Bank Index is at a 5-year low with most of Europe’s banks losing some 40% of their value this year.  British real estate funds already gated to prevent withdrawals are seeing significant revaluations lower.  In Asia it goes from bad to worse for Japan as Abenomics proves a costly failure.  China continues to devalue its currency in classic credit bust fashion as it attempts to trade its way out of crisis.  Exporting strong deflationary pressures in the process to its trading partners.

This is Caleb Lawrence Registered Investment Adviser Scotts Valley Drive and Willis Road in the Scotts Valley Plaza, Suite 202 or call me toll free at 888-RICH PIG / 888-742-4744.

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