U.S. Economic News Week Ending March 25, 2011

Global markets rallied this week as positive news on U.S. economic growth paired with upbeat earnings reports from technology bellwether Oracle to buoy optimism. Investors snapped up riskier assets on hopes of a quick resolution to the conflict in Libya and amid signs that the worst may be over in Japan. In Europe, the sealing of a eurozone bailout plan, added to the more upbeat mood of the week.

Keeping a cap on market gains were worries about continued Allied air strikes on Libya and uncertainty over the economic prospects for Portugal and Ireland. Concerns over the stability of Japan's Fukushima Daiichi nuclear power complex and about the overall economic impact of the March 11 earthquake and tsunami kept pressure on markets, particularly in Asia. The Japanese government pegged the recent earthquakes total economic damage at up to $300 billion.

Continued violence in the Middle East, which this week drew Israel and Syria further into the fold, pushed oil prices above $106 per barrel.
Global economic news

U.S. economy grew 3.1% in the fourth quarter
The U.S. economy grew more than had been estimated in the fourth quarter of 2010, according to revised figures from the U.S. Department of Commerce. The 3.1% annual rate of growth was led by a 4% rise in consumer spending. The 2010 U.S. economic growth rate of 2.9% was the countrys highest annual growth rate in five years. Corporate profits rose 29% last year, their largest annual gain since 1948.

Portugal's crisis deepens; prime minister resigns
Portugals political and economic crisis deepened as it came closer to an international bailout after the countrys parliament rejected a proposed austerity plan and the prime minister resigned. The cost of Portuguese borrowing hit a new high after the countrys debt was downgraded by two notches by Standard & Poors, to BBB from A, and Fitch cut its rating for Portugal to A-.

New eurozone bailout fund created
European finance ministers set up a new bailout fund that will be able to lend 500 billion ($710 billion) to eurozone member nations in need. The fund, which will require 80 billion in cash from the 17 eurozone countries, will replace the current temporary fund in 2013.

U.S. consumer sentiment down
Consumer sentiment in the United States fell more than expected in March on higher gasoline prices and in the wake of Japans earthquake and tsunami. The Thomson Reuters/University of Michigan Index of Consumer Sentiment fell to 67.5, its lowest reading since November 2009, from 77.5 in February.

U.S. new home sales hit record low
Sales of new single-family homes fell to a record low in February, with prices dipping to their lowest point since December 2003, according to a report from the Commerce Department. Home sales fell 16.9% in February from the previous month to a seasonally adjusted level of 250,000 units, the lowest since records began in 1963. February sales were down 28% from a year earlier.

U.S. existing home sales down 9.6%
Sales of existing, or previously occupied, U.S. homes slid 9.6% in February to their lowest level in almost nine years, the National Association of Realtors reported. The results were worse than forecast.

U.S. jobless claims fall
A trend of fewer first-time jobless claims continued in the week ended March 19, as unemployment benefits claims fell by 5,000 to 382,000. The four-week moving average fell to 385,250, its lowest level since July 2008. And, the total number of people continuing to receive jobless benefits declined by 2,000 to 3.72 million, the smallest amount since September 2008.

U.S. durable goods orders slow
U.S. orders for durable goods fell 0.9% in February, the third decline in four months for manufacturers orders for goods meant to last at least three years. Despite the recent downturn, year-to-date orders are 7.6% higher than for the same period last year.

Japanese consumer prices continue to slide
Japans core consumer price index fell 0.3% in February from a year earlier, the 24th consecutive month it has declined. Analysts are unsure what impact the March 11 earthquake and tsunami will have. Reconstruction spending could put pressure on prices to rise, possibly offset by weakening consumer spending.

Ireland's economy shrinks
Irelands gross domestic product shrank by 1.6% in the fourth quarter of 2010, according to the countrys Central Statistics Office. The countrys gross national product shrank 2.1% in 2010 after a 10.7% decline in 2009.

Eurozone recovery slows
Economic recovery in the eurozone continued in March, but at a slower pace, according to Markit Economics composite purchasing managers' index, which fell to 57.5 from 58.2 in February.

U.K. inflation reaches 4.4%
U.K. annual inflation rose at its fastest rate in more than two years in February, up from a 4% annual increase in January. Inflation now is at twice the Bank of Englands targeted 2% rate, putting pressure on the central bank to increase its interest rate. Contributing to higher inflation are increases in the cost of housing services such as water, electricity, gas, and other fuels.
Global corporate news

AT&T purchase of T-Mobile to be reviewed closely
AT&T has agreed to buy T-Mobile USA from Deutsche Telekom for $39 billion, creating the largest cellular company in the United States, and leaving only two other major U.S. competitors Verizon and Sprint Nextel. However, the proposed deal is expected to face very close scrutiny and a political battle in Washington, as politicians consider the impact on competition, costs, and consumers.

Oracle income rises after its Sun acquisition
Business software developer Oracle reported a 78% jump in income on a 37% rise in revenue for its fiscal third quarter. Results were boosted by its acquisition of Sun Microsystems a year ago.

Japans manufacturers begin to resume operations
Japans automakers had mixed plans for resuming production after the earthquake. Nissan Motor restarted its auto assembly operations and parts manufacturing this week, while Toyota Motor plans to resume production of three hybrid models next Monday, March 28. Honda Motor extended the suspension of its two domestic auto assembly operations through April 3 and canceled orders for May. One issue affecting these firms was inconsistent power supply for makers of computer chips used in the vehicles. Manufacturing stoppages could curb global auto production estimated at 75 million vehicles this year by 5 million units.

U.S. Federal Reserve denies Bank of America dividend increase
The Federal Reserve Board rejected a Bank of America proposal to increase its dividend in 2011. The central bank gave no reason for the rejection, which led observers to speculate that it had to do with results of the latest government stress tests for the nations 19 largest holding companies.

Inditex profit, sales rise on global expansion
Spains Inditex, the worlds largest fashion retailer, posted a 32% rise in net profit in 2010. It plans to add up to 500 stores to its 5,044 existing stores in 77 countries this year. Included are 120 new stores slated for China, where Inditex already owns 143 stores.

Best Buy hurt by slow sales, tough competition
Big-box electronics retailer Best Buy saw its fourth-quarter earnings fall 16% on weak computer and television sales and stiff competition from online retailers and discount stores.