Protestors cheered, and investors breathed an initial sigh of relief Friday when embattled Egyptian President Hosni Mubarak gave in to protestor demands and resigned from office. The departure turned the weeks of protests in Cairo's Tahrir Square into celebrations. The army will now take control of the country. The past three weeks of demonstrations caused some worried investors to seek safety in what has come to be known as the "risk off" trade. The U.S. dollar and Treasuries gained, and Brent crude prices hovered above $100 per barrel, amid speculation that the unrest may curb oil flows through Egypt's Suez Canal.
The crisis, combined with some disappointing earnings news from technology bellwether Cisco Systems, forced the Dow Jones Industrial Average lower for the first time in nine days on Thursday. That was one day after the blue chip index hit a 30-month high. The tensions in the Middle East and worries about faster inflation in the emerging world sparked the biggest losses in the MSCI Emerging Markets Index since November.
Global economic news
China raises rates again
Policymakers in emerging market countries continued to raise interest rates this week to fight accelerating inflation. China raised its lending and deposit rates for a third time in four months. The Bank of Korea, however, surprised markets and opted to keep its key lending rate on hold at 2.75%. Last week, the Bank of Indonesia increased borrowing costs for the first time in more than two years. Speculation that policymakers will take further steps to curb inflation has weighed on stocks in the region.
BOE keep stimulus in place
The Bank of England maintained its emergency stimulus measures and held its benchmark interest rate unchanged at a record low 0.5%.
U.S. jobless claims fall
The number of U.S. workers filing new claims for unemployment benefits fell more than expected last week. Claims dropped 36,000 to 383,000 in the week ended February 5. It was the lowest reading since July 2008 and points to the continued improvement in the job market as the economy picks up speed.
U.S. consumer confidence picks up
The Thomson Reuters/University of Michigan preliminary index of consumer confidence for the month showed confidence among U.S. investors increased to the highest level in eight months.
U.S. trade gap widens
The U.S. trade gap widened 5.9% in December, and the full-year gap gained the most in 10 years. Imports rose 2.6%, and exports grew 1.8%, with both categories hitting levels not seen in over two years.
U.K. manufacturing unexpectedly declined in December
Manufacturing activity fell as economic activity was hampered by the coldest weather seen in a century. Factory output declined for the first time since April, falling 0.1% from November.
Global corporate news
Takeover deals dominate corporate news
The Deutsche Börse announced this week that it is in talks to buy the New York Stock Exchange in a deal valued at almost $10 billion. Meanwhile, the London Stock Exchange made a $3.1 billion bid for TMX Group. The week began with news that AOL would buy the Huffington Post for $315 million. In a merger that would step up consolidation in the offshore oil drilling industry, Ensco agreed to buy Pride International for $7.3 billion. Looking to gain a stronger foothold in the diagnostics industry, Danaher said it would buy Beckman Coulter for $5.87 billion. Kindred Healthcare disclosed it would acquire RehabCare for about $1.3 million in the latest health care deal driven by cost cutting. Overall, analysts say the trend reflects increased corporate confidence and economic recovery.
Nokia announced a partnership with Microsoft
In what is being billed as a major strategy shift for the handset maker, Nokia said it will adopt Windows Phone as its main smartphone platform. The move is part of Nokia's broad strategic partnership with Microsoft.
Cisco disappoints
Technology bellwether Cisco Systems disappointed investors this week as it announced its profits fell 18%; the company also reported its fourth consecutive quarterly decline in margins. Both were viewed as sign of growing competitive pressures in Cisco's core network switching business.
Credit Suisse hit by tougher regulations, capital requirements
Credit Suisse Group reported that its fourth-quarter net income rose a less-than-expected 6%. The company, which is Switzerland's second-largest bank, cut its 2010 dividend as well as future profit targets, saying that tougher regulations and capital requirements will likely cut into its bottom line in years to come.
Other profit news mixed
PepsiCo reported a 5% drop in its fourth-quarter profit and cut its earnings outlook, saying it faces headwinds from high unemployment, cost inflation, and a potentially tough pricing environment. Allstate, the largest publicly traded home and auto insurer in the United States said fourth-quarter profit fell 43% because of an increase in disaster claims. Sprint Nextel's fourth-quarter loss narrowed slightly, and Whole Foods lifted its 2011 forecasts for profits and sales. Kraft Foods' net income fell 24% amid higher costs for meat, packaging and other inputs.
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