Financial markets rode waves of mixed economic news and lacked direction this week. For the second consecutive week, oil futures sold off sharply, prompted by a U.S. Department of Energy report of falling fuel consumption. However, oil prices climbed back later in the week. Gasoline stockpiles grew as squeezed consumers, leery of $4-per-gallon prices, pumped less fuel. In general, commodity trading ─ including silver and gold ─ was highly volatile as bulls and bears battled. Stock indices and bond yields also lacked a clear direction as reports of higher inflation competed for attention with renewed economic growth in France and Germany, a resurgence of mergers and acquisition activity and share buyback announcements in the United States, and a number of disappointing earnings announcements.
Global economic news
U.S. inflation above 3%
U.S. consumer prices rose a seasonally adjusted 0.4% in April from March, the U.S. Department of Labor reported, with the core consumer price index ─ excluding food and energy ─ climbing just 0.2% for the month. Year over year, prices rose 3.2%, the largest 12-month gain since October 2008. Core inflation has risen just 1.3% since April 2010. Gasoline prices jumped 3.3% in April and more than 33% over the past year.
Producer prices also rose in April, a seasonally adjusted 0.8% increase after a 0.7% increase in March. Core prices, stripping out food and energy components, climbed 0.3% in both months.
Consumer sentiment up
The University of Michigan-Thomson Reuters preliminary consumer sentiment index climbed to 72.4 for May from 69.8 in April. The increase surpassed economists’ expectations of a 71.0 reading.
Inflation rises in China, Germany
China and Germany both reported an increase in consumer-price inflation in April. In China, the consumer price index rose 5.3% last month from a year earlier after a 5.4% rise in March. Food prices were 11.5% higher annually. China’s government responded swiftly, raising bank reserve requirements for the eighth time since last October. China’s largest lenders must now keep a record 21% of their assets in reserve. German consumer prices were 2.4% higher in April than a year earlier, driven mainly by energy prices.
Import prices higher in U.S.
U.S. imports cost 2.2% more in April than March, according to the U.S. Department of Labor. Higher prices for imports of commodities, including oil, metals, and grains, were the key factor. Import prices rose 11.1% from April 2010, behind a 36.8% surge in petroleum import prices.
Chinese trade surplus, U.S. trade deficit both grow
China’s trade surplus grew to 11.43 billion in April, according to the country’s General Administration of Customs. While imports rose 22% from a year earlier, the country’s exports increased by almost 30%. The larger-than-expected surplus may add pressure on China to allow its yuan currency to appreciate more quickly.
The U.S. trade deficit widened in March, rising 6.0% from February to $48.18 billion, the U.S. Department of Commerce reported. While exports grew to a record, surpassing $172 billion, imports climbed to more than $220 billion. The U.S. trade deficit with China shrank slightly in March.
U.S. retail sales rise
U.S. retail sales rose by 0.5% in April from the previous month, the U.S. Commerce Department reported, slightly lower than economists’ expectations. March sales were revised to a 0.9% increase from the initial estimate of 0.4%. Rising energy prices were a large component of the increase.
U.S. first-time jobless claims ease
The number of Americans filing first-time claims for unemployment insurance fell 44,000 in the week ended May 7. Applications totaled 434,000. The four-week average rose by 4,500 to 436,750.
S&P downgrades Greek debt
Standard & Poor’s lowered its rating on long-term Greek government debt to "B" from "BB-." S&P said Greece might have to resort to a partial debt default. Greece’s debt is now rated lower than that of Angola, Senegal, Nigeria, and Zambia.
Economies in France, Germany surpass expectations
The eurozone’s two largest economies, Germany and France, both grew more than forecast in the first quarter of 2011. The German economy expanded 1.5% over the fourth quarter of 2010, while economic activity in France was 1% greater than in the previous quarter. Overall economic output in the eurozone grew 0.8% in the first quarter.
Industrial output falls in Eurozone, rises in UK
Eurozone industrial production fell in March, as Germany, Italy, France, and other countries experienced slower growth. It was the first such decline in activity for the Eurozone in six months. U.K. industrial production grew in March, but at a slower rate than expected. The U.K. Office for National Statistics reported that industrial production rose 0.3% in March from February and 0.7% on an annual basis.
Global corporate news
Microsoft to buy Skype
Microsoft announced its plan to purchase Skype, the Internet telephone company that provides free online video and voice communication. The stunning announcement is seen as an indication that the powerhouse software firm plans to expand into the mobile phone and Internet markets.
A year-long car rental company takeover battle is finally being resolved, as Hertz announced it will offer Dollar Thrifty shareholders $72 a share, significantly higher than the $42 a share originally offered a year ago April, before a bidding war last summer between Hertz and Avis resulted in a stalemate.
Buybacks make comeback
Corporate share buybacks resumed, with Philip Morris and AT&T among the firms taking advantage of favorable borrowing conditions after holding onto cash since the financial crisis began in late 2008.
Toyota profit plunges
Toyota Motor announced a 77% decline in its quarterly net profit and gave no annual forecast, as it continued to struggle in assessing the scope of disruption to its production following Japan’s March 11 earthquake. Toyota is expected to fall behind General Motors and possibly Volkswagen to the third position in global vehicle sales in 2011.
Nissan posts profit
Nissan Motor said it turned a profit in its fiscal fourth quarter, swinging to net earnings of 30.8 billion yen ($380 million) from a loss of 11.6 billion yen in the same quarter a year earlier. Japan’s second-largest carmaker by volume grew sales by 10%, and its operating profit rose 7.2% from a year earlier. While Nissan was affected by the Japanese earthquake, it was not hit as hard as Toyota and Honda, and its factories in Japan and North America have recovered more quickly from damage and supply interruptions.
NEC earnings drop
NEC reported a 36% drop in net profit for its fiscal fourth quarter and a full-fiscal-year net loss, as the impact of the March 11 earthquake and tsunami compounded existing weakness in NEC’s technology-services business.
Disney disappoints
The Walt Disney Company’s quarterly earnings fell shy of expectations and last year’s results as revenues dropped in its studio entertainment and parks and resorts segments.
Cisco earnings drop
Cisco Systems reported a decrease of 18% in earnings for its fiscal third quarter. The networking equipment giant faces tough competition and a slowdown in its core routing and switching businesses. Cisco also lowered its guidance for its fourth quarter.
Citigroup executes reverse stock split
A 1-for-10 reverse stock split of Citigoup common stock, announced in March, was carried out this week, reducing the number of outstanding shares of Citigroup common stock to 2.9 billion from roughly 29 billion. Price per share went from $4 to above $40. Citigroup said it aims to reduce volatility and broaden its base of potential investors. Some institutional investors are barred from buying shares with single-digit prices.
RBC retreats from U.S. banking
In a dramatic about-face, Royal Bank of Canada is giving up on its long-term quest to establish a strong presence in the U.S. banking industry and is seeking buyers for its U.S. operation, known as RBC Bank. RBC’s move to retrench stands in contrast to its Canadian rivals, Bank of Montreal and Toronto-Dominion Bank, and their recent large acquisitions.
Friday, May 13, 2011
Wednesday, May 11, 2011
U.S. Economic News Week Ending May 6, 2011
Concern about the strength of the global recovery sparked the most drastic selloff in commodities in two years and dragged global stocks lower this week. Assets considered risky were sold en masse, a move begun early in the week on fears that the killing of Al Qaeda leader Osama bin Laden would spark retribution. The decline in silver prices seemed to kick off the commodity-wide rout. Silver, which was up 161% on the year as recently as last Friday, lost one-quarter of its value over the week. The rapid decline prompted exchanges to raise margin requirements, and triggered computer-generated trend selling, which further exacerbated the exodus. Overall, commodities plunged the most since 2009 amid worries that the markets were overheated. On Friday, a solid U.S. employment report put an end to the selling for the week and helped the Dow Jones Industrial Average and Standard & Poor's 500 Stock Index recover some of their losses.
Global economic news
U.S. economic reports point to recovery woes
Economic news in the United States this week continued to underline the struggles the U.S. economy faces as it recovers. U.S. companies added more jobs than expected in April, even as the unemployment rate rose for the first time in five months. The private sector posted the strongest employment gains in five years as nonfarm payrolls rose by 244,000. The unemployment rate rose to 9% from 8.8% in March. That monthly jobs report came one day after news that applications for jobless benefits unexpectedly jumped more than expected last week. That increase was partially the result of auto shutdowns caused by the disaster in Japan. Other reports also pointed to the pressures on recovery. U.S. consumer confidence fell to a five-week low as the highest gas prices in five years negatively affected Americans' attitudes toward spending.
Manufacturing recovery losing momentum
The Institute for Supply Management's gauge of factory activity edged lower in April to 60.4 from 61.2; any reading above 50 indicates expansion. The report showed production growth and a rising backlog of orders and suggested that supply chain woes resulting from problems in Japan are affecting U.S. manufacturers. Also in April, manufacturing in the United Kingdom fell unexpectedly to a seven-month low amid declining consumer confidence and falling construction orders. In Russia, manufacturing suffered its largest monthly drop since December 2008 after export orders fell and companies scaled back investment.
Inflation concerns mount globally
Around the world, inflation concerns were front and center. The Organization for Economic Cooperation and Development reported that consumer prices in developed economies rose in March at the fastest pace since October 2008. The price increases were driven by faster energy and food inflation. Prices in the OECD's 34 member countries rose by 2.7% for the 12 months ended in March. The core inflation rate, which excludes volatile food and energy, rose to 1.4% in March from 1.3% in February.
Inflation concerns have prompted central banks to tighten monetary policy. The Reserve Bank of India raised rates for the ninth time since March 2010. Central banks in the Philippines, Malaysia, and Vietnam also lifted borrowing costs, and China's central bank, in its first-quarter monetary policy report, affirmed that controlling inflation is its top priority, even after its manufacturing survey slid in April from March, an indication that growth may slow.
ECB, BOE, and Royal Bank of Australia leave rates unchanged
The European Central Bank left rates unchanged as it tried to balance the challenges of its weaker members with its inflation concerns. In the United Kingdom, the Bank of England kept its benchmark rate at a record low amid signs that its recovery is faltering. The Reserve Bank of Australia also left its benchmark interest rate unchanged for a fifth-straight meeting as a record-low Australian dollar helps contain inflation pressures.
U.S. banks more willing to lend
The U.S. Federal Reserve Board's quarterly senior loan officer survey released Monday showed that the willingness of banks to lend money to consumers rose more than it has in 17 years. Consumer demand for loans remained spotty, however, and that slack demand has capped banks' top-line revenue growth. In stark contrast to the U.S. report, a survey of senior lending officers of 45 emerging market banks found that banks report strong and growing demand for loans from consumers and businesses. The first-of-its-kind survey was conducted by the Institute of International Finance, a global association of large banks.
Portugal agrees to bailout
To help its ailing economy, Portugal agreed to a three-year 78 billion financial bailout program with the European Union and International Monetary Fund.
U.S. becomes fuel exporter
The United States became a net exporter of fuel for the first time in nearly 20 years. U.S. refiner product exports rose 24.4% in the first quarter of 2011 from a year ago, while imports declined 14.4%, according to the American Petroleum Institute.
Global corporate news
Automakers report strong results
Profits at General Motors tripled on stronger vehicle demand and on gains from the sale of stakes in two of its subsidiaries. Chrysler swung to a quarterly profit as vehicle sales increased dramatically in the first quarter. This is the first profitable period the automaker has had since mid-2006, when it was part of DaimlerChrysler AG.
Marsh & McLennan's first-quarter earnings rose 31% on better-than-expected revenue growth, driven by its risk and insurance and consulting businesses.
Global economic news
U.S. economic reports point to recovery woes
Economic news in the United States this week continued to underline the struggles the U.S. economy faces as it recovers. U.S. companies added more jobs than expected in April, even as the unemployment rate rose for the first time in five months. The private sector posted the strongest employment gains in five years as nonfarm payrolls rose by 244,000. The unemployment rate rose to 9% from 8.8% in March. That monthly jobs report came one day after news that applications for jobless benefits unexpectedly jumped more than expected last week. That increase was partially the result of auto shutdowns caused by the disaster in Japan. Other reports also pointed to the pressures on recovery. U.S. consumer confidence fell to a five-week low as the highest gas prices in five years negatively affected Americans' attitudes toward spending.
Manufacturing recovery losing momentum
The Institute for Supply Management's gauge of factory activity edged lower in April to 60.4 from 61.2; any reading above 50 indicates expansion. The report showed production growth and a rising backlog of orders and suggested that supply chain woes resulting from problems in Japan are affecting U.S. manufacturers. Also in April, manufacturing in the United Kingdom fell unexpectedly to a seven-month low amid declining consumer confidence and falling construction orders. In Russia, manufacturing suffered its largest monthly drop since December 2008 after export orders fell and companies scaled back investment.
Inflation concerns mount globally
Around the world, inflation concerns were front and center. The Organization for Economic Cooperation and Development reported that consumer prices in developed economies rose in March at the fastest pace since October 2008. The price increases were driven by faster energy and food inflation. Prices in the OECD's 34 member countries rose by 2.7% for the 12 months ended in March. The core inflation rate, which excludes volatile food and energy, rose to 1.4% in March from 1.3% in February.
Inflation concerns have prompted central banks to tighten monetary policy. The Reserve Bank of India raised rates for the ninth time since March 2010. Central banks in the Philippines, Malaysia, and Vietnam also lifted borrowing costs, and China's central bank, in its first-quarter monetary policy report, affirmed that controlling inflation is its top priority, even after its manufacturing survey slid in April from March, an indication that growth may slow.
ECB, BOE, and Royal Bank of Australia leave rates unchanged
The European Central Bank left rates unchanged as it tried to balance the challenges of its weaker members with its inflation concerns. In the United Kingdom, the Bank of England kept its benchmark rate at a record low amid signs that its recovery is faltering. The Reserve Bank of Australia also left its benchmark interest rate unchanged for a fifth-straight meeting as a record-low Australian dollar helps contain inflation pressures.
U.S. banks more willing to lend
The U.S. Federal Reserve Board's quarterly senior loan officer survey released Monday showed that the willingness of banks to lend money to consumers rose more than it has in 17 years. Consumer demand for loans remained spotty, however, and that slack demand has capped banks' top-line revenue growth. In stark contrast to the U.S. report, a survey of senior lending officers of 45 emerging market banks found that banks report strong and growing demand for loans from consumers and businesses. The first-of-its-kind survey was conducted by the Institute of International Finance, a global association of large banks.
Portugal agrees to bailout
To help its ailing economy, Portugal agreed to a three-year 78 billion financial bailout program with the European Union and International Monetary Fund.
U.S. becomes fuel exporter
The United States became a net exporter of fuel for the first time in nearly 20 years. U.S. refiner product exports rose 24.4% in the first quarter of 2011 from a year ago, while imports declined 14.4%, according to the American Petroleum Institute.
Global corporate news
Automakers report strong results
Profits at General Motors tripled on stronger vehicle demand and on gains from the sale of stakes in two of its subsidiaries. Chrysler swung to a quarterly profit as vehicle sales increased dramatically in the first quarter. This is the first profitable period the automaker has had since mid-2006, when it was part of DaimlerChrysler AG.
Marsh & McLennan's first-quarter earnings rose 31% on better-than-expected revenue growth, driven by its risk and insurance and consulting businesses.
U.S. Economic News Week Ending April 29, 2011
All of the major U.S. stock indices hit multi-year highs this week, with the Russell 2000 Index reaching an all-time high, as companies continued to report strong first-quarter profits. Nearly 80% of companies reporting thus far have posted improved sales and operating earnings over the year-earlier period. The strong corporate news helped overshadow weak U.S. economic reports, including a sharp slowdown in first-quarter economic growth, higher weekly initial jobless claims, and anemic new-home sales.
The U.S. dollar fell against major currencies, with its weakness reinforced by the U.S. Federal Reserve Board’s announcement that it would maintain low interest rates for the foreseeable future. The prices of gold and silver soared to new records, boosted by the weak dollar, investor nervousness, and the precious metals’ reputation as an inflation hedge.
Global economic news
U.S. Fed to phase out quantitative easing
The Fed announced it would phase out its $600 billion bond-buying program in June. In its first-ever news conference this week, the central bank said it would maintain ultra-low interest rates for the time being.
U.S. gross domestic product up 1.8%
U.S. economic growth slowed sharply in the first quarter, to a 1.8% annualized rate, from 3.1% in the last quarter of 2010, the U.S. Department of Commerce reported. Higher prices, especially for gasoline and food, squeezed consumer budgets, winter storms took their toll on economic activity, and a rise in imports reduced the country’s output as well. In addition, the federal government reduced its spending by 7.9%, the sharpest drop in a decade.
U.S. Fed’s inflation gauge rises 3.8%
The price index for personal consumption expenditures, the Fed’s key inflation gauge, jumped an annualized 3.8% in the first quarter of 2011. Excluding food and energy items, the price index rose 1.5% during the quarter. The Fed expects the overall inflation measure to climb between 2.1% and 2.8% this year.
U.S. consumer sentiment climbs
U.S. consumers were more confident in April than in March, as indicated by a rise in the Thomson Reuters/University of Michigan final index of consumer sentiment to 69.8 from 67.5 in March, which was the index’s lowest level since November 2009. It appears that the improving job market is helping Americans tolerate higher fuel costs.
U.S. jobless claims spike
Initial jobless claims increased unexpectedly by 25,000, to a seasonally adjusted 429,000 in the week ended April 23, the U.S. Department of Labor reported. The four-week average rose by 9,250 to 408,500, marking the first time since mid-February that the average sat above 400,000.
New home sales lag in the United States
Sales of new homes increased by 11.1% in March from February. However, sales were down 21.9% from a year earlier. The median price for a new home sold in March was $213,800, up 2.9% from a month earlier but 4.9% lower than in March 2010. Meanwhile, the Standard & Poor's/Case-Shiller index of property values in 20 cities fell 3.3% from February 2010 to February 2011, underscoring the continued housing market weakness.
Durable goods orders up
New orders for durable goods increased 2.5% in March, the Commerce Department reported. The strength of this report stood in sharp contrast to some other economic reports, and it supports the view that any economic slowdown related to commodity price increases or poor weather could be temporary and brief. The durable goods report pointed to strong growth in a variety of areas, including metals, machinery, computers, software, and automobiles.
Japanese industrial output plummets after earthquake
The impact of the March 11 earthquake and tsunami was very clear in the country’s report on industrial production in March. According to the Ministry of Economy, Trade, and Industry, output at factories and mines dropped by 15.3% in March from February, the largest monthly decrease since the government began collecting this comparative data in February 1953. In its semiannual report, the Bank of Japan curbed its forecast for growth in real gross domestic product to 0.6% for this year, down from 1.6% in a January forecast. It predicts a strong rebound in 2012, however, to 2.9% growth.
Eurozone inflation up a notch in April
European inflation reached its fastest pace in more than two years, rising at a 2.8% annualized pace, up from 2.7% in March, according to an initial estimate released by the European Union’s statistics office. An index of executive and consumer sentiment fell to 106.2 from 107.3 in March, indicating a potential gradual slide in business and consumer confidence. Separately, the Markit Eurozone Retail Purchasing Managers Index eased to 52.2 in April from 53.5 in March but remained above its long-term average.
Global corporate news
Oil giants pump up profits
Very strong first-quarter results indicate the oil industry is poised to enjoy substantial profits in 2011. Exxon Mobil reported a 69% jump in first-quarter earnings, Royal Dutch Shell posted a 60% rise in profits, ConocoPhillips’ first-quarter earnings rose 44%, and Chevron's first-quarter earnings grew 36%. All four benefited from higher oil prices. Exxon and Conoco attributed some of the robust results to strong refining margins. Shell mentioned growth in upstream production and ongoing cost-cutting. Exxon also enjoyed a rise in production volumes, while Conoco achieved its results despite a sharp drop in production. Chevron posted stronger refining margins.
French oil company Total reported a 35% rise in adjusted net profit on higher crude oil and natural gas prices. The firm’s unadjusted net profit was 51% higher than a year earlier.
Automakers post varied results
Global automakers were all over the map in their first-quarter earnings. Ford Motor reported a $2.6 billion quarterly profit, its largest first-quarter profit since 1998. However, Honda Motor said its quarterly earnings fell 38% as it struggled to find enough auto parts to bring factory production above 50% capacity. Honda warned that earnings would remain weak for the next two quarters. Meanwhile, Ford said it idled a manufacturing plant in Taiwan and a South African assembly plant as precautionary moves to help conserve parts.
Volkswagen reported a vastly improved net profit on booming emerging market demand. Mitsubishi Motors posted a 42% decrease in its fiscal fourth-quarter earnings because of the yen’s strength and lower domestic production. Daimler’s profit nearly doubled in the first quarter and its revenue rose by 17%, driven by accelerated demand for luxury cars.
Deutsche Bank rebounds
Deutsche Bank had its best first quarter since 2007. The large German bank’s net profit rose 7%, benefiting from its recent acquisition of retail bank Postbank, which helps to diversify Deutsche Bank’s mix of banking businesses.
Microsoft profits up, but Windows sales down
Despite sharply rising quarterly profits on robust sales of Office and Xbox, Microsoft reported a decline in the sales of its Windows operating system as demand for traditional personal computers weakened because of competition from tablet devices.
Caterpillar soars on emerging market sales
Caterpillar, the world’s largest construction equipment maker, surpassed first-quarter earnings estimates on surging sales in developing countries. Net income was more than five times higher than a year earlier, while sales climbed 57%.
Merck tops estimates on cost-cutting, higher sales
Merck, the second-largest U.S. pharmaceutical firm, posted a higher-than-estimated first-quarter profit, benefiting from cost reductions and rising sales of its Januvia diabetes pill, which more than offset revenue losses to generic competition.
The U.S. dollar fell against major currencies, with its weakness reinforced by the U.S. Federal Reserve Board’s announcement that it would maintain low interest rates for the foreseeable future. The prices of gold and silver soared to new records, boosted by the weak dollar, investor nervousness, and the precious metals’ reputation as an inflation hedge.
Global economic news
U.S. Fed to phase out quantitative easing
The Fed announced it would phase out its $600 billion bond-buying program in June. In its first-ever news conference this week, the central bank said it would maintain ultra-low interest rates for the time being.
U.S. gross domestic product up 1.8%
U.S. economic growth slowed sharply in the first quarter, to a 1.8% annualized rate, from 3.1% in the last quarter of 2010, the U.S. Department of Commerce reported. Higher prices, especially for gasoline and food, squeezed consumer budgets, winter storms took their toll on economic activity, and a rise in imports reduced the country’s output as well. In addition, the federal government reduced its spending by 7.9%, the sharpest drop in a decade.
U.S. Fed’s inflation gauge rises 3.8%
The price index for personal consumption expenditures, the Fed’s key inflation gauge, jumped an annualized 3.8% in the first quarter of 2011. Excluding food and energy items, the price index rose 1.5% during the quarter. The Fed expects the overall inflation measure to climb between 2.1% and 2.8% this year.
U.S. consumer sentiment climbs
U.S. consumers were more confident in April than in March, as indicated by a rise in the Thomson Reuters/University of Michigan final index of consumer sentiment to 69.8 from 67.5 in March, which was the index’s lowest level since November 2009. It appears that the improving job market is helping Americans tolerate higher fuel costs.
U.S. jobless claims spike
Initial jobless claims increased unexpectedly by 25,000, to a seasonally adjusted 429,000 in the week ended April 23, the U.S. Department of Labor reported. The four-week average rose by 9,250 to 408,500, marking the first time since mid-February that the average sat above 400,000.
New home sales lag in the United States
Sales of new homes increased by 11.1% in March from February. However, sales were down 21.9% from a year earlier. The median price for a new home sold in March was $213,800, up 2.9% from a month earlier but 4.9% lower than in March 2010. Meanwhile, the Standard & Poor's/Case-Shiller index of property values in 20 cities fell 3.3% from February 2010 to February 2011, underscoring the continued housing market weakness.
Durable goods orders up
New orders for durable goods increased 2.5% in March, the Commerce Department reported. The strength of this report stood in sharp contrast to some other economic reports, and it supports the view that any economic slowdown related to commodity price increases or poor weather could be temporary and brief. The durable goods report pointed to strong growth in a variety of areas, including metals, machinery, computers, software, and automobiles.
Japanese industrial output plummets after earthquake
The impact of the March 11 earthquake and tsunami was very clear in the country’s report on industrial production in March. According to the Ministry of Economy, Trade, and Industry, output at factories and mines dropped by 15.3% in March from February, the largest monthly decrease since the government began collecting this comparative data in February 1953. In its semiannual report, the Bank of Japan curbed its forecast for growth in real gross domestic product to 0.6% for this year, down from 1.6% in a January forecast. It predicts a strong rebound in 2012, however, to 2.9% growth.
Eurozone inflation up a notch in April
European inflation reached its fastest pace in more than two years, rising at a 2.8% annualized pace, up from 2.7% in March, according to an initial estimate released by the European Union’s statistics office. An index of executive and consumer sentiment fell to 106.2 from 107.3 in March, indicating a potential gradual slide in business and consumer confidence. Separately, the Markit Eurozone Retail Purchasing Managers Index eased to 52.2 in April from 53.5 in March but remained above its long-term average.
Global corporate news
Oil giants pump up profits
Very strong first-quarter results indicate the oil industry is poised to enjoy substantial profits in 2011. Exxon Mobil reported a 69% jump in first-quarter earnings, Royal Dutch Shell posted a 60% rise in profits, ConocoPhillips’ first-quarter earnings rose 44%, and Chevron's first-quarter earnings grew 36%. All four benefited from higher oil prices. Exxon and Conoco attributed some of the robust results to strong refining margins. Shell mentioned growth in upstream production and ongoing cost-cutting. Exxon also enjoyed a rise in production volumes, while Conoco achieved its results despite a sharp drop in production. Chevron posted stronger refining margins.
French oil company Total reported a 35% rise in adjusted net profit on higher crude oil and natural gas prices. The firm’s unadjusted net profit was 51% higher than a year earlier.
Automakers post varied results
Global automakers were all over the map in their first-quarter earnings. Ford Motor reported a $2.6 billion quarterly profit, its largest first-quarter profit since 1998. However, Honda Motor said its quarterly earnings fell 38% as it struggled to find enough auto parts to bring factory production above 50% capacity. Honda warned that earnings would remain weak for the next two quarters. Meanwhile, Ford said it idled a manufacturing plant in Taiwan and a South African assembly plant as precautionary moves to help conserve parts.
Volkswagen reported a vastly improved net profit on booming emerging market demand. Mitsubishi Motors posted a 42% decrease in its fiscal fourth-quarter earnings because of the yen’s strength and lower domestic production. Daimler’s profit nearly doubled in the first quarter and its revenue rose by 17%, driven by accelerated demand for luxury cars.
Deutsche Bank rebounds
Deutsche Bank had its best first quarter since 2007. The large German bank’s net profit rose 7%, benefiting from its recent acquisition of retail bank Postbank, which helps to diversify Deutsche Bank’s mix of banking businesses.
Microsoft profits up, but Windows sales down
Despite sharply rising quarterly profits on robust sales of Office and Xbox, Microsoft reported a decline in the sales of its Windows operating system as demand for traditional personal computers weakened because of competition from tablet devices.
Caterpillar soars on emerging market sales
Caterpillar, the world’s largest construction equipment maker, surpassed first-quarter earnings estimates on surging sales in developing countries. Net income was more than five times higher than a year earlier, while sales climbed 57%.
Merck tops estimates on cost-cutting, higher sales
Merck, the second-largest U.S. pharmaceutical firm, posted a higher-than-estimated first-quarter profit, benefiting from cost reductions and rising sales of its Januvia diabetes pill, which more than offset revenue losses to generic competition.
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