If bad economic and bond market news raises the odds that the Federal Reserve and other central banks will launch another round of monetary stimulus, then “bad” news is really “good” news, right?

That’s the logic today when despite—perhaps better yet, “because of”—bad news on U.S. unemployment and Italian bond yields, global stock markets have moved back into rally mode.

This morning the Department of Labor announced that initial claims for unemployment increased by 13,000 to 380,000 for the week that ended on April 7. (The jump would have been bigger except that initial claims for the previous week were revised upwards to 367,000 from 357,000.) That was the highest level since January 28. The less volatile four-week moving average climbed to 368,500 from 364,250. Economists surveyed by Bloomberg had expected 355,000 initial claims for the week.

At today’s bond auction in Italy the government sold 2.88 billion euros ($3.78 billion) of its 3-year note at a yield of 3.89%. Read more

Like so much market turmoil since 2010, today’s sell off is rooted in Europe–and it’s hard for me to see a quick reversal of the current downward trend

If the world’s strongest economies—China, Germany, and the United States–are slowing (and that’s the worry now), then the world’s weaker economies—Spain, Italy and the rest of the “austerity” economies of the EuroZone—will feel the most pain.

That the logic this morning in what I’d call the second shoe dropping sell-off after yesterday’s decline in U.S. stocks on Friday’s weaker than expected jobs numbers.

In Europe the German DAX index is down 2.5%, the Spanish IBEX 35 down 3%, the French CAC 40 down 3.1%, and the Italian (Milan) FTSE MIB is down almost 5%.

But the worst damage actually didn’t take place in EuroZone stock markets today. Read more

Will February retail sales numbers tomorrow confirm the strength of U.S. economy indicated in Friday’s jobs numbers?

Tomorrow morning the stock market will be looking for confirmation that recent solid growth in the U.S. economy will continue. With European economies slowing and China’s growth in doubt global financial markets will be watching carefully to see if recent positive U.S. economic trends stay on track.

Tuesday’s data comes in the form of February U.S. retail sales and investors will be looking for confirmation that the U.S. consumer will keep driving the U.S. economic recovery. Economists are forecasting growth of 1% for retail sales. That would be up from 0.4% growth in January. Given the good news Friday on growth in aggregate incomes in the United States and recent data from the Federal Reserve showing an increase in consumer debt, I think there’s a good chance that retail sales will come in above expectations.

The week is then relatively quiet on economic news in the United States until Thursday when we get another episode in the continuing initial claims for unemployment story. Economists are looking for a slight drop to 360,000 new claims for unemployment from 362,000 in the prior week. Even that small drop would be enough to keep the four-week moving average trending lower. And that, in turn, would confirm the good jobs news from Friday, March 9.

Is this the long-feared (and long-awaited) correction? I don’t think we’ll know until Thursday or Friday

Is this the correction that has been looming as a possibility for weeks?

As of 2:15 p.m. New York time today, March 6, the U.S. Standard & Poor’s 500 Index is down 1.5%. The German DAX Index closed down 3.4%, and Hong Kong’s Hang Seng Index fell 2.2% overnight. Today’s action follows on yesterday’s drop.

Sure looks like it, no?

Well, it depends. Read more

Tepid growth (in the U.S.) is still better than no growth (in the EuroZone) in today’s economic reports

It was a tale of two economies today.

Data showed the U.S. economy growing tepidly.

Which was still a quite a bit better than data from Europe that showed the EuroZone headed toward recession.

In the United States initial claims for unemployment dropped to 351,000 for the week ended February 25—but the numbers showed a drop only because the prior week’s initial claims figures were revised upward to 353,000 from 351,000. (Economists had projected initial claims of 355,000 for the week.) Personal spending climbed just 0.2% in January, well below the 0.4% forecast by economists surveyed by Briefing.com. Income grew by 0.3%, less than the 0.4% projected by economists. And the Institute for Supply Management manufacturing index dropped to 52.4 in February from 54.1. The index stayed above the 50 level that separates growth from contraction but a move down to 52.4 is a move in the wrong direction.

But the U.S. news was a stroll on the beach compared to the news from the EuroZone. Inflation in the European Union climbed to 2.7% in February from 2.6% in January. Unemployment in the EuroZone hit 10.7% in January, the highest since the start of the euro in 1999. The EuroZone purchasing managers index did edge higher to 49.0 in February from 48.8 in January but a reading below 50 still pointed to a contracting economy. The German purchasing managers index for manufacturing remained above 50 at 50.2 in February but that marked a move lower (from 51.0) for the EuroZone’s strongest economy.  The French purchasing managers index came in at 50, down from 50.2 in January and in Italy it remained below 50 at 47.8.

European stocks rose on the day on news of progress in finalizing the new Greek rescue package and on well-subscribed Spanish bond auctions. But the economies of the EuroZone continue to show signs of slowing. At some point that economic fact becomes a problem for countries relying on austerity to meet their budget deficit targets.

That “problem” has already shown up in the European summit that began today with Spain asking for flexibility on meeting its budget deficit targets for 2011 and 2012.