Europe’s Record Jobless Rate Seen Resisting Recovery

Seve Trophy 2013: Day 1 Stars Who Will Help Continental Europe End Drought

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British businesses ranging from huge financial corporations to hairdressers again reported solid growth, rounding off the strongest quarter in more than 16 years. Overall, the surveys painted a slightly brighter picture than the “weak, fragile and uneven” recovery alluded to on Wednesday by European Central Bank president Mario Draghi. On balance, they also boded well for the global economy. Indexes from China showed growth picking up there, even if data due later from the U.S. are expected to show a slight easing in the expansion for non-manufacturing companies, which have consistently outpaced their European peers. The main disappointment in Europe was Spain, where a rise in business activity during August – the first in more than two years – proved short-lived as firms slipped back into decline. Still, the data pointed to a broadening recovery across the euro zone, said Nick Matthews, senior European economist at Nomura, though that had yet to be borne out in official data. “The hard data so far for the third quarter has perhaps a bit more on the disappointing side – in particular industrial production …was very weak in July,” said Matthews. “We expect this to bounce back, but this suggests we could see a slightly slower pace of growth in the third quarter relative to the second quarter.” PMI compiler Markit said its surveys suggested the euro zone economy grew around 0.2 percent from July through September, a touch below the 0.3 percent registered in the second quarter. Nomura’s Matthews said they suggested a slightly stronger rate of growth for the final months of the year. STILL NOT ON SOLID GROUND Markit’s Eurozone Services PMI rose to 52.2 in September from August’s 50.7, little changed from a preliminary reading of 52.1. Readings above 50 signify growth. Businesses in No.1 economy Germany reported rising new orders and staffing levels, while France’s private sector grew for the first time in a year and a half. The upbeat mood was further bolstered by news that euro zone retail sales jumped 0.7 percent in August, month-on-month, hitting the top end of forecasts.

Europe’s cheap stocks set for a long catch-up rally

Europe can pair the big-hitting Belgian with a more conservative player, as it did with Gonzalo Fernandez-Castano, and let him take some chances knowing his partner can make up for any mistakes. After Day 1, which team is your Seve Trophy pick? Continental Europe 0% Total votes: 0 The plan worked out perfectly as Colsaerts won four holes en route to a 5-and-3 victory for Europe. He closed out the match with an eagle on No. 15, illustrating that aggressive style that can be a flaw during normal stoke-play events. His performance on the opening day should provide him with a boatload of confidence. That makes him as dangerous as any player in the tournament because when he’s striking the ball like he did on Thursday, it’s a huge advantage for Europe. Joost Luiten Stuart Franklin/Getty Images Luiten is a journeyman with limited international experience, but he made his presence felt in a major way on Day 1. He put Gregory Bourdy on his shoulders and carried him to victory; he scored all four of the hole wins the pair had in a narrow victory. In order to win these type of tournaments, a team needs at least one or two unexpected players to have great weeks. That’s especially true when one side is on an extended skid like Europe.

The Organisation for Economic Cooperation and Development sees Italian unemployment at 12.5 percent next year. Data released at 10 a.m. in Rome tomorrow will show whether joblessness still is near a May all-time high of 12.2 percent. It stood at 12 percent in July. The situation for the unemployed is particularly bleak in Spain and Greece , where the OECD expects jobless rates to remain above 25 percent in 2014. While unemployment in Spain fell for the first time in two years in the second quarter, net job creation requires at least 1 percent year-on-year economic growth, Economy Minister Luis de Guindos said this month. That level wont be reached before the final quarter of 2014, according to economists surveyed by Bloomberg. Social Tragedy Unemployment in Europe is a social tragedy and we need to address it, OECD Secretary-General Angel Gurria said in July when presenting the organizations annual employment outlook . Siemens AG (SIE) , Europes largest engineering company, will eliminate 15,000 jobs, the Munich-based corporation said on Sept. 29. It initially planned some 8,000 cuts globally, a person familiar with the program told Bloomberg News in October. Earlier this month, Air France-KLM (AF) Group, Europes biggest airline, scrapped a plan to break even at its main French unit this year, putting 2,800 jobs in the country at risk. While most Southern European economies are struggling to provide work for the unemployed, the jobless rate in Germany , the regions largest economy, remained at 6.8 percent in September, according to 31 estimates in a separate Bloomberg survey . Thats close to a two-decade low of 6.7 percent. The Federal Labor Agency is due to publish these data tomorrow at 9:55 a.m.

The amount of money invested in European large-cap value equities was 24 billion euros ($32.49 billion) by the end of August, half as much as five years ago, Morningstar data shows. “The common theme is catch-up by lagging assets. That’s a late-cycle theme,” said Christopher Potts, head of economics and strategy at Cheuvreux. “We’re not going to do it in six months. If you’re talking about the recovery of value in Europe, it’s a five-year idea. It took five years to kill that view and it’s going to take years for it to come back.” In 2011, the only other time in the past decade when the price/earnings gap between growth and value was as wide as it is now, the broad market retreat started around three months after that gap began to close. That could be an indicator of when the broader market rally may run out of steam this time although not necessarily. In 2000 the gap between growth and value stocks was narrow yet the overall market downturn did not begin until around five months after the gap began to close. In the past five years the MSCI Europe Value Index has underperformed growth by nearly a quarter, in the run-up to the 2000 market peak, the gap between the two was less than 5 percentage points. SMALLER POOL In the current market rally – European stocks rose in 14 of the last 16 months and the STOXX Europe 600 index is up by around a third in that time, trading near five-year highs – the pool of obviously cheap, “deep value” stocks for investors to choose from has already contracted. The number of STOXX Europe 600 companies trading below their 10-year average price/earnings ratio has halved to around 270 over the past two years. On the flip side, investors’ aversion to companies exposed to the economic cycle during recent years has left many well-established companies with healthy balance sheets trading at lower valuations than the overall market. In these cases, the distinction between value and quality stocks has been blurred.