One thing is on most people's mind: how is the economy going to recover? According to conventional wisdom, the job market is one of the main indicators of economic strength. From newly minted college graduates to industry veterans, many citizens are struggling to find jobs. It's no secret that unemployment is one of the few economic numbers that investors everywhere are looking out for.
Today at 6:00pm, the South Korean unemployment rate will come out and let investors know how the consumer retail industry is doing. Consumer retail includes companies such as LG Display Co LPL, Hyundai Motors HYMLF, and Samsung SSGFF. These companies essentially reflect how the average Korean businesses are using their funds to reinvest in the public. South Korean unemployment can be analyzed similarly to American unemployment numbers.
A low unemployment rate indicates that companies are hiring consumers more than previously thought, even in the face of uncertain economic times. Ultimately, it signals that businesses are confident in the public and are giving consumers jobs, driving the economy. This indicates to traders that things may be better, after all, and tends to move the equity markets higher. In pre-market trading, the currency will move higher along with equities as well.
This afternoon, traders will be looking for the South Korean unemployment rate to to be lower than 3.2%. If the number is lower than the estimate, the Korean Won will immediately move higher, and barring unforeseen European news or other macroeconomic news, will set the stage for the Asian equity markets.
Long-term investors should also keep in mind the unemployment rate from the prior period, which was 3.1%. The figure comes in every month, so long-term investors should keep track of monthly snapshots of the job market and economy at large. Any aberrations or sudden drops could mean that consumers are getting skittish about the economy and are refusing to spend money on items not deemed necessary.
Investors should also keep in mind that the holiday season may artificially bolster trends. If investors see a sudden drop in January the unemployment rate, they should not assume the economy is extremely bullish. However, if investors see a sudden increase this afternoon, then there may be underlying problems affecting consumers and businesses alike.
Consumers have a few options when it comes to understanding the global economy. The unemployment rate is one indicator that could help investors gauge where the economy is heading into the future. Investors should also keep up with the major news on a real-time basis to stay on top of major developments that move markets.
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Bullish View:
Traders who believe that South Korean unemployment rate will be positive might want to consider the following trades:
- Long Asian equity futures by purchasing shares or call options. If you go with the options strategy, you could purchase a straddle just to reduce risk associated with the bet.
- Short the US Dollar Index against another currency like the Japanese Yen. Asian currencies are likely to move higher.
- Long the Korean Won against the US Dollar, which will obviously move higher if the CPI is positive.
Traders who believe that South Korean unemployment rate will not be positive may consider the following positions:
- Short Asian equity futures. The futures market typically relies on technical analysis for entry and exit points, so identifying the next support level may be useful.
- Long the Dollar Index, which is likely to move up if equities go down. US equities move down if Asian equities show weakness.
- Short the KRW against the dollar, which will go down if the South Korean economy does not seem as positive as expected.
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