The showdown in Congress over a deal to raise the U.S. government’s borrowing ceiling while cutting annual spending continued unresolved, with all parties digging in their heels. Looming largely is the August 2 deadline, which the U.S. Department of Treasury has designated as the date after which the U.S. government may no longer be able to meet all of its financial obligations. Even if lawmakers can meet the deadline, one of the major credit ratings agencies could downgrade U.S. debt.
A downgrade could affect interest rates, and still-struggling consumers and businesses could be squeezed. Among other possible consequences, hundreds of local governments and housing-finance programs could have their credit ratings downgraded. On Thursday, Moody’s Investors Service placed 177 top-rated municipal bond issuers on review for possible downgrades.
The recent search for safe-haven investments caused stocks to falter and the price of gold to spike. Some $9 billion a day has been withdrawn from money market funds this week, with a two-week outflow of $62 billion, according to Nomura Securities International. Ironically, the financial uncertainty pushed more investors into buying Treasuries, sending prices higher and yields lower. Major currencies rose against the dollar, including the Japanese yen, the Swiss franc, the euro, and the Australian, Canadian, and Singapore dollars.
Other economic reports were mixed. Although second-quarter U.S. economic growth was low, U.S. jobless claims fell below 400,000 for the week ended July 23, and home sales contracts rose in June. However, May home prices were flat, and U.S. consumer confidence reports offered conflicting indications, while consumer confidence fell in the eurozone and the United Kingdom.
Global economic news
U.S. economy barely expands in second quarter
The U.S. economy grew anemically in the second quarter. Gross domestic product grew at an annualized, seasonally adjusted pace of 1.3%, the U.S. Department of Commerce reported. The rate of growth in the first quarter was revised downward, to 0.4% from the earlier estimate of 1.9%. Economists had expected the GDP to rise 1.8% in the second quarter. Consumer spending rose at an annualized 0.1% rate, its weakest level in two years.
Spain on review for debt downgrade
Moody's Investors Service placed Spain's "Aa2" credit rating on review for a possible downgrade. The yield on Spain's 10-year government bond rose 1.7 percentage points to 6.136%, widening the spread between Spanish sovereign debt and similar German debt to 354.2 basis points. This underscores the financial strain the second Greek bailout package is having on other financially weak European countries.
U.S. jobless claims fall to 398,000
Initial jobless claims fell by 34,000 to 398,000 for the week ended July 23, below the 400,000 level, which generally indicates an economy with overall job growth. The four-week average fell by 8,500 to 413,750.
Chicago Purchasing Managers’ Index falls
The Chicago Purchasing Managers’ Index decreased to 58.8 in July, from 61.1 in June, according to the Institute for Supply Management. A reading of 60.2 had been expected. Readings above 50 indicate an expanding business sector.
U.S. home sale contracts rise in June
The number of contracts to buy previously owned U.S. homes surprisingly rose in June, as buyers were attracted to lower house prices and lower borrowing costs. The 2.4% rise in pending home sales followed a gain of 8.2% in May. Because of high cancellation rates, however, its difficult to gauge whether this will lead to higher home sales.
May home prices flat
U.S. home prices rose in May from April but remained below year-earlier levels. The Case-Shiller index of 10 major metropolitan areas rose 1.1% and the 20-city index was 1% higher in May than a month earlier. Year to year, prices for the two indexes were down 3.6% and 4.5%, respectively.
Durable-goods orders drop
Durable-goods orders fell by 2.1% in June, the second decline in three months, pointing to ongoing economic sluggishness, according to the U.S. Commerce Department.
Consumer confidence gets mixed reading
U.S. consumer confidence rose in July, according to the Conference Board. Its monthly index of consumer confidence rose to 59.5 from 57.6 in June. However, the Bloomberg Consumer Comfort Index fell to -46.8 in the week ended July 24, from a reading of -43.3 the previous week. The Reuters/University of Michigan’s consumer sentiment index fell to 63.7 in July from 71.5 in June.
Eurozone confidence dips
Businesses and consumers in the eurozone grew less confident about their prospects in July, according to the Economic Sentiment Index, the European Commission’s monthly survey of economic confidence. The measure dropped to 103.2 from 105.4 in June. It was the ESI’s fifth-straight monthly decline.
U.K. consumer confidence falls
Consumer confidence in the U.K., already sagging, fell further in July. A sentiment index fell to -30, its lowest point since April, from -25 in June and -22 a year earlier. All components of the index fell. The U.K. economy grew a meager 0.2% in the second quarter after being flat for the previous half year.
India fights inflation with higher interest rates
The Reserve Bank of India, the country’s central bank, raised interest rates by 0.5 percentage points to 8.0%, its eleventh increase since March 2010. Indian inflation reached 9.44% in June.
German inflation creeps higher
Consumer prices rose 0.4% in Germany in July, and 2.4% from a year earlier. Because Germany is dependent on the European Central Bank (ECB) for monetary policy and the ECB must also watch out for weak European economies, Germany may have to accept rising inflation for now.
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Global corporate news
UPS delivers higher profits
Global shipping firm United Parcel Service posted a 26% growth in second-quarter profit on strength in China and Europe. UPS said it expects robust profit growth on international routes in the coming months.
European carmakers outpace American rivals
German auto maker Daimler and France’s PSA Peugeot-Citroen both announced healthy profit increases this week, while Ford’s profit fell and Chrysler posted a loss for the second quarter. Peugeot reported a 19% rise in profit for the first half of 2011 despite the impact of the Japanese earthquake and tsunami and the production interruption that created. Daimler had a 29% rise in second-quarter net profit on thriving demand for new trucks and luxury cars in many major global markets. Ford’s profit was trimmed by spending on new-model development and higher prices for commodities. Chrysler’s loss was due to a $551 million one-time charge to repay loans to the United States and Canadian governments.
Higher prices boost oil giants’ profits
Royal Dutch Shell, British Petroleum, and Exxon all benefited from higher oil prices in the quarter ending June 30. BP bounced back from a $17-billion loss a year ago, stemming from a $32-billion charge to cover costs of the Gulf of Mexico oil spill, to a second-quarter net profit of $5.62 billion this year. Total revenue rose 39% in the quarter. Shell’s profits rose to $8.7 billion from $4.4 billion a year ago. Exxon’s net income was $10.7 billion, up from $7.6 billion a year ago.
RIM, Nokia and Nintendo show impact of losses to Apple
Research in Motion, Nokia, and Nintendo continue to struggle in the face of very tough competition from Apple and Google in the smart phone space. Research in Motion announced a plan to cut 2,000 jobs, 11% of its workforce, as the BlackBerry maker struggles with shrinking market share of North American smart phone sales. Nokia’s debt was downgraded two notches, to "Baa2" from "A3," by Moody’s Investor Service, reflecting the sharp deterioration of Nokia’s market position. Apple and Samsung Electronics overtook Nokia for the top two positions in the global smartphone market in the second quarter, according to market research firm Strategy Analytics. Nintendo cut its profit forecast for the year ending next March by more than 80% as its 3DS hand-held player has been hurt by gamers’ appetite for games that can be played online or on smart phones, including Apple’s iPhone.
Dunkin’ Donuts serves up IPO, coffee competition to heat up
The hunger for initial public offerings continued this week, with 11 IPOs, including an offering from Dunkin’ Donuts that raised $423 million, and will promote the franchiser’s growth.
Sunday, July 31, 2011
Monday, July 25, 2011
U.S. Economic News Week Ending July 22, 2011
Global stocks were mostly higher for the week as European leaders agreed on a plan to reduce Greece's debt burden and U.S. legislators appeared to be heading toward a deficit-reduction deal. Numerous positive earnings announcements further supported the markets as financial and technology heavyweights reported better-than-expected results.
U.S. and global economic news
European leaders agreed to aid package for Greece
European leaders on Thursday agreed on a plan to reduce Greece's debt burden in an effort to prevent contagion to other weak economies in the eurozone. The overall size of the bailout package to cover Greece's financial gap is 109 billion and will include the participation of the International Monetary Fund and the private sector. The plan also cuts interest rates on bailout loans to Greece and doubles the repayment period to 15 years. Officials said the interest rates on Ireland's and Portugal's bailout loans will be cut to the same low level. European leaders also agreed on new steps to prevent the spread of Greece's debt problems. In the wake of the debt deal, Fitch Ratings said the role of the private sector in the Greek bailout plan would constitute a "restrictive default." In other words, the proposed debt exchange implies a 20% net present value loss for banks and Greek government debt holders.
U.S. lawmakers continue debate over deficit reduction deal
In the United States, Congress and the White House continued negotiations to cement a deal to increase the government's borrowing authority while cutting spending and overhauling the tax code. The White House has said if the government's $14.29 trillion debt ceiling is not raised by August 2, the United States will run out of cash to pay its bills. Standard & Poor's repeated a warning that there is a 50% chance that it will lower the U.S. credit rating within three months. The company first warned of this possibility on July 14.
Weekly U.S. jobless claims rise
U.S. jobless claims unexpectedly rose last week after declining for two weeks in a row. Claims increased by 10,000 to a seasonally adjusted 418,000, after declining for two weeks in a row. The four-week moving average of new claims, considered a more reliable indicator of the performance of the labor market, fell last week by 2,750 to 421,250. Economists consider the economy to be adding more jobs than it is shedding when the weekly claims number falls below 400,000.
German business confidence falls
German business confidence fell more than expected in July, according to the Ifo Institute's business climate index, which dropped to its lowest level in nine months.
U.S. home sales fall
Sales of previously owned homes fell 0.8% in June to a seasonally adjusted annual rate of 4.77 million, the lowest level in seven months, amid weakness in the job market and overall economy. It was the third-straight monthly decline and worse than forecast. Also in June home construction rose to the highest level in five months. Compared with the same month a year earlier, new home construction was up 16.7%; however construction is still below a healthy level, which economists say would be a pace of 1 million to 1.5 million units. In June, that annual level was at 629,000. Meanwhile, the National Association of Home Builders reported that confidence among homebuilders rose in July from June but remained at depressed levels as the housing market continued to struggle.
U.S. leading indicators rise
The Conference Board reported that its index of U.S. leading indicators rose 0.3% in June from a 0.8% increase in May. The gauge measures the outlook for the next three to six months.
U.S. and global corporate news
Morgan Stanley performance surprises investors
Morgan Stanley posted a smaller-than-expected second-quarter loss, which sent the company's stock surging the most in two years. The loss came from a $1.7 billion charge related to the conversion of Mitsubishi UFJ Financial Group's preferred Morgan Stanley stake. Morgan Stanley posted a 14% gain in trading revenue and was the only major U.S. bank to report a gain in this area. Bank of America reported losses of $8.83 billion in the second quarter as mortgage-related charges outweighed lower credit costs. Goldman Sachs Group's second-quarter profit came in at $1.05 billion, significantly lower than expectations, after market conditions led the firm to reduce risk taking to the lowest levels in five years. Even so, profits rose 77% from $613 million a year ago.
Tech companies report strong profits
Apple's fiscal third-quarter earnings more than doubled, exceeding analysts' expectations, as the company reported surging sales of the iPhone and iPad. Microsoft's profit rose 30% in its fiscal fourth quarter helped by the software and service contracts of its corporate customers. IBM reported an 8% increase in net income as the 100-year-old company got a boost from robust sales of new models of its mainframes. The company also lifted its profit forecast amid buoyant demand for software. Intel, the world's largest chipmaker, reported that its sales rose 21% while net income rose to $2.95 billion from $2.89 billion in the year-earlier quarter. The company also forecast third-quarter sales that exceeded some analysts' estimates. EMC reported a 28% gain in second-quarter earnings as companies increased spending on storage products and software for Internet-based computing, and eBay reported a 25% jump in revenue, while net income fell 31%.
Coke, Johnson & Johnson, and Harley-Davidson announce results
Coca-Cola's second-quarter profit rose 18%. The company got a boost from a bottler acquisition and from strong volume growth overseas. Johnson & Johnson reported a 20% decline in second-quarter profit on costs associated with its exit from its heart-device business and product recalls. Profits, however, exceeded Wall Street expectations. Harley-Davidson, the largest U.S. motorcycle manufacturer, said profit rose after it increased sales in the U.S. market for the first time in almost five years.
Borders to liquidate remaining stores
Borders was forced to liquidate its remaining 399 stores after receiving too few bids in a bankruptcy auction. The company, which employs about 10,700 people, is now expected to go out of business by the end of September.
Zillow raises $69.2 million in IPO
Zillow, the online real estate information service, raised $69.2 million in its initial public offering.
Express Scripts to buy Medco; CNOOC to purchase OPTI Canada
Express Scripts agreed to buy Medco Health Solutions for $29.1 billion in cash and stock. In merging, the companies will form the largest manager of drug prescription services with nearly a third of the market. China's largest offshore-oil producer, CNOOC, agreed to buy bankrupt Canadian oil sands developer OPTI Canada for about $2.1 billion. The agreement comes as China seeks to invest in energy projects amid a global commodities boom. In past deals, Chinese firms have targeted minority stakes in Canadian companies.
Harry Potter movie sales set record
The last of the long-running series of Harry Potter films, Harry Potter and the Deathly Hallows Part 2, from Time Warner's Warner Bros. Pictures set a sales record for its U.S. opening and took in nearly one half a billion dollars worldwide.back to top
U.S. and global economic news
European leaders agreed to aid package for Greece
European leaders on Thursday agreed on a plan to reduce Greece's debt burden in an effort to prevent contagion to other weak economies in the eurozone. The overall size of the bailout package to cover Greece's financial gap is 109 billion and will include the participation of the International Monetary Fund and the private sector. The plan also cuts interest rates on bailout loans to Greece and doubles the repayment period to 15 years. Officials said the interest rates on Ireland's and Portugal's bailout loans will be cut to the same low level. European leaders also agreed on new steps to prevent the spread of Greece's debt problems. In the wake of the debt deal, Fitch Ratings said the role of the private sector in the Greek bailout plan would constitute a "restrictive default." In other words, the proposed debt exchange implies a 20% net present value loss for banks and Greek government debt holders.
U.S. lawmakers continue debate over deficit reduction deal
In the United States, Congress and the White House continued negotiations to cement a deal to increase the government's borrowing authority while cutting spending and overhauling the tax code. The White House has said if the government's $14.29 trillion debt ceiling is not raised by August 2, the United States will run out of cash to pay its bills. Standard & Poor's repeated a warning that there is a 50% chance that it will lower the U.S. credit rating within three months. The company first warned of this possibility on July 14.
Weekly U.S. jobless claims rise
U.S. jobless claims unexpectedly rose last week after declining for two weeks in a row. Claims increased by 10,000 to a seasonally adjusted 418,000, after declining for two weeks in a row. The four-week moving average of new claims, considered a more reliable indicator of the performance of the labor market, fell last week by 2,750 to 421,250. Economists consider the economy to be adding more jobs than it is shedding when the weekly claims number falls below 400,000.
German business confidence falls
German business confidence fell more than expected in July, according to the Ifo Institute's business climate index, which dropped to its lowest level in nine months.
U.S. home sales fall
Sales of previously owned homes fell 0.8% in June to a seasonally adjusted annual rate of 4.77 million, the lowest level in seven months, amid weakness in the job market and overall economy. It was the third-straight monthly decline and worse than forecast. Also in June home construction rose to the highest level in five months. Compared with the same month a year earlier, new home construction was up 16.7%; however construction is still below a healthy level, which economists say would be a pace of 1 million to 1.5 million units. In June, that annual level was at 629,000. Meanwhile, the National Association of Home Builders reported that confidence among homebuilders rose in July from June but remained at depressed levels as the housing market continued to struggle.
U.S. leading indicators rise
The Conference Board reported that its index of U.S. leading indicators rose 0.3% in June from a 0.8% increase in May. The gauge measures the outlook for the next three to six months.
U.S. and global corporate news
Morgan Stanley performance surprises investors
Morgan Stanley posted a smaller-than-expected second-quarter loss, which sent the company's stock surging the most in two years. The loss came from a $1.7 billion charge related to the conversion of Mitsubishi UFJ Financial Group's preferred Morgan Stanley stake. Morgan Stanley posted a 14% gain in trading revenue and was the only major U.S. bank to report a gain in this area. Bank of America reported losses of $8.83 billion in the second quarter as mortgage-related charges outweighed lower credit costs. Goldman Sachs Group's second-quarter profit came in at $1.05 billion, significantly lower than expectations, after market conditions led the firm to reduce risk taking to the lowest levels in five years. Even so, profits rose 77% from $613 million a year ago.
Tech companies report strong profits
Apple's fiscal third-quarter earnings more than doubled, exceeding analysts' expectations, as the company reported surging sales of the iPhone and iPad. Microsoft's profit rose 30% in its fiscal fourth quarter helped by the software and service contracts of its corporate customers. IBM reported an 8% increase in net income as the 100-year-old company got a boost from robust sales of new models of its mainframes. The company also lifted its profit forecast amid buoyant demand for software. Intel, the world's largest chipmaker, reported that its sales rose 21% while net income rose to $2.95 billion from $2.89 billion in the year-earlier quarter. The company also forecast third-quarter sales that exceeded some analysts' estimates. EMC reported a 28% gain in second-quarter earnings as companies increased spending on storage products and software for Internet-based computing, and eBay reported a 25% jump in revenue, while net income fell 31%.
Coke, Johnson & Johnson, and Harley-Davidson announce results
Coca-Cola's second-quarter profit rose 18%. The company got a boost from a bottler acquisition and from strong volume growth overseas. Johnson & Johnson reported a 20% decline in second-quarter profit on costs associated with its exit from its heart-device business and product recalls. Profits, however, exceeded Wall Street expectations. Harley-Davidson, the largest U.S. motorcycle manufacturer, said profit rose after it increased sales in the U.S. market for the first time in almost five years.
Borders to liquidate remaining stores
Borders was forced to liquidate its remaining 399 stores after receiving too few bids in a bankruptcy auction. The company, which employs about 10,700 people, is now expected to go out of business by the end of September.
Zillow raises $69.2 million in IPO
Zillow, the online real estate information service, raised $69.2 million in its initial public offering.
Express Scripts to buy Medco; CNOOC to purchase OPTI Canada
Express Scripts agreed to buy Medco Health Solutions for $29.1 billion in cash and stock. In merging, the companies will form the largest manager of drug prescription services with nearly a third of the market. China's largest offshore-oil producer, CNOOC, agreed to buy bankrupt Canadian oil sands developer OPTI Canada for about $2.1 billion. The agreement comes as China seeks to invest in energy projects amid a global commodities boom. In past deals, Chinese firms have targeted minority stakes in Canadian companies.
Harry Potter movie sales set record
The last of the long-running series of Harry Potter films, Harry Potter and the Deathly Hallows Part 2, from Time Warner's Warner Bros. Pictures set a sales record for its U.S. opening and took in nearly one half a billion dollars worldwide.back to top
Friday, July 15, 2011
U.S. Economic News Week Ending July 15, 2011
Stocks fell around the world this week amid deepening worries about the risk of contagion in Europe and the fiscal and economic woes of the United States. Italy's borrowing costs soared to their highest level in more than a decade amid fears over the country's solvency and political stability, and gold prices rallied to a record high as fears over Europe's sovereign debt crisis spurred investment demand for safe-haven assets. Throughout the week investors watched as rating agencies doled out and threatened more downgrades, European finance ministers continued their struggle to contain the region's sovereign debt crisis, and as U.S. lawmakers battled over raising the U.S. debt ceiling.
U.S. and global economic news
U.S. House announces plans for vote on debt ceiling
The U.S. House of Representatives announced Friday that it plans to vote next week on a measure that would raise the government's debt limit by $2.4 trillion, cut spending, cap government expenditures, and propose a balanced-budget constitutional amendment. President Barack Obama and congressional leaders from both parties have been meeting daily in search of a compromise that would cut the deficit and allow for the government to sell debt after its borrowing authority is exhausted August 2.
Moody's cuts Ireland's debt rating to junk status
Moody's Investors Service downgraded Ireland's debt rating to junk status, lowering it to "Ba1" from "Baa3." The rating agency cited the probability that Ireland will need additional financing and that investors will need to share in its losses before it returns to the private market to borrow. Moody's added that the outlook remains negative. Ireland, which had a top "Aaa" rating just over two years ago, has suffered after a real-estate boom collapsed, fueling bank bailouts and a surge in the country's debt level.
S&P puts chance U.S. debt will be downgraded at 50%
Standard & Poor's said there was a 50% chance that it would lower the "AAA" bond rating on U.S. debt within three months. The warning came as U.S. lawmakers continued to debate raising the debt ceiling.
Bernanke says Fed not likely to buy more bonds soon
U.S. Federal Reserve Board Chairman Ben Bernanke told U.S. lawmakers that the Fed was not inclined to launch a third round of bond buying soon to boost the economy. His words on Thursday crushed investors' hopes that the Fed would take further action to support the economy. Bernanke also warned lawmakers that the failure of the U.S. Congress to raise the debt ceiling would lead to "calamitous" consequences for the U.S. and global economies.
Consumer, producer, and import inflation tamed by drop in energy costs
The cost of living in the United States fell in June for the first time in a year as the biggest drop in energy costs since 2008 compensated for growing inflation in other goods and services. The Consumer Price Index fell 0.2%, while he core measure, which excludes more volatile food and energy costs, climbed 0.3% for a second month -- more than forecast and the biggest back-to-back gain in three years. Meanwhile, the Producer Price Index fell 0.4% in June, while the cost of goods, excluding fuel and energy, rose 0.3%. Prices of goods imported into the United States dropped for the first time in a year as oil and food prices retreated. The U.S. Department of Labor reported a 0.5% fall in the import price index following a revised 0.1% gain in May. The cost of imported petroleum fell 1.6% from the prior month.
Weekly jobs numbers show improvement in labor market
The number of Americans filing for first-time jobless claims for unemployment benefits dropped last week to the lowest level since April. Applications for jobless benefits fell 22,000 in the week ended July 9, to 405,000 claims.
U.S. trade gap widens as oil prices rise
The U.S. trade deficit widened in May to the highest level in almost three years as the cost of imported oil rose. The gap grew 15%, to $50.2 billion, far wider than forecast. Imports rose 2.6% as a barrel of crude oil averaged $108.70, the most since August 2008.
China grows more than expected
China reported another quarter of stronger-than-expected growth. Its economy grew 9.5% in the second quarter, and its industrial production was also better than expected.
U.S. and global corporate news
Investment banking profits boost JPMorgan, Citigroup profits
JPMorgan Chase, the second-largest U.S. bank, reported that its second-quarter net income rose a more-than-expected 13%, as its investment banking profits surged 49% and as improving credit trends allowed the bank to reduce its credit card loss reserve by $1 billion. In 2010 JPMorgan was the most profitable U.S. bank, with a record $17.4 billion in earnings.
Citigroup, the third-largest U.S. bank, said its second-quarter profit rose 24% on higher investment banking fees and fewer losses tied to troubled asserts. Investment banking revenue rose 61%.
BHP Billiton, the world's largest mining company, said it plans to acquire Petrohawk Energy for $12.1 billion in cash. The purchase will give BHP access to large shale assets in Texas and Louisiana. The deal, one of the largest of the year, will double BHP's resource base in oil and natural gas.
ConocoPhillips to split oil businesses
ConocoPhillips is splitting its oil refining and production businesses into separate publicly traded companies. The decision makes Conoco the latest energy company to bow to the stock market's preference for standalone exploration and production companies in an industry that once believed that bigger was better. Marathon Oil, El Paso, and Williams have already moved to separate exploration and production businesses from the rest of their operations.
News Corp. abandons bid for British Sky Broadcasting
News Corp. abandoned its £8.3 billion bid to take full control of British Sky Broadcasting as the company remains mired in a phone-hacking scandal. Last week that scandal led Rupert Murdoch to close its popular tabloid News of the World.
Google's profits jump 36%
Google reported a stronger-than-expected 36% jump in second-quarter profits as revenues rose to a record level. Google benefitted throughout the quarter from strength in its core search business. It also gained traction with its new operations, including its new social network Google+.
U.S. and global economic news
U.S. House announces plans for vote on debt ceiling
The U.S. House of Representatives announced Friday that it plans to vote next week on a measure that would raise the government's debt limit by $2.4 trillion, cut spending, cap government expenditures, and propose a balanced-budget constitutional amendment. President Barack Obama and congressional leaders from both parties have been meeting daily in search of a compromise that would cut the deficit and allow for the government to sell debt after its borrowing authority is exhausted August 2.
Moody's cuts Ireland's debt rating to junk status
Moody's Investors Service downgraded Ireland's debt rating to junk status, lowering it to "Ba1" from "Baa3." The rating agency cited the probability that Ireland will need additional financing and that investors will need to share in its losses before it returns to the private market to borrow. Moody's added that the outlook remains negative. Ireland, which had a top "Aaa" rating just over two years ago, has suffered after a real-estate boom collapsed, fueling bank bailouts and a surge in the country's debt level.
S&P puts chance U.S. debt will be downgraded at 50%
Standard & Poor's said there was a 50% chance that it would lower the "AAA" bond rating on U.S. debt within three months. The warning came as U.S. lawmakers continued to debate raising the debt ceiling.
Bernanke says Fed not likely to buy more bonds soon
U.S. Federal Reserve Board Chairman Ben Bernanke told U.S. lawmakers that the Fed was not inclined to launch a third round of bond buying soon to boost the economy. His words on Thursday crushed investors' hopes that the Fed would take further action to support the economy. Bernanke also warned lawmakers that the failure of the U.S. Congress to raise the debt ceiling would lead to "calamitous" consequences for the U.S. and global economies.
Consumer, producer, and import inflation tamed by drop in energy costs
The cost of living in the United States fell in June for the first time in a year as the biggest drop in energy costs since 2008 compensated for growing inflation in other goods and services. The Consumer Price Index fell 0.2%, while he core measure, which excludes more volatile food and energy costs, climbed 0.3% for a second month -- more than forecast and the biggest back-to-back gain in three years. Meanwhile, the Producer Price Index fell 0.4% in June, while the cost of goods, excluding fuel and energy, rose 0.3%. Prices of goods imported into the United States dropped for the first time in a year as oil and food prices retreated. The U.S. Department of Labor reported a 0.5% fall in the import price index following a revised 0.1% gain in May. The cost of imported petroleum fell 1.6% from the prior month.
Weekly jobs numbers show improvement in labor market
The number of Americans filing for first-time jobless claims for unemployment benefits dropped last week to the lowest level since April. Applications for jobless benefits fell 22,000 in the week ended July 9, to 405,000 claims.
U.S. trade gap widens as oil prices rise
The U.S. trade deficit widened in May to the highest level in almost three years as the cost of imported oil rose. The gap grew 15%, to $50.2 billion, far wider than forecast. Imports rose 2.6% as a barrel of crude oil averaged $108.70, the most since August 2008.
China grows more than expected
China reported another quarter of stronger-than-expected growth. Its economy grew 9.5% in the second quarter, and its industrial production was also better than expected.
U.S. and global corporate news
Investment banking profits boost JPMorgan, Citigroup profits
JPMorgan Chase, the second-largest U.S. bank, reported that its second-quarter net income rose a more-than-expected 13%, as its investment banking profits surged 49% and as improving credit trends allowed the bank to reduce its credit card loss reserve by $1 billion. In 2010 JPMorgan was the most profitable U.S. bank, with a record $17.4 billion in earnings.
Citigroup, the third-largest U.S. bank, said its second-quarter profit rose 24% on higher investment banking fees and fewer losses tied to troubled asserts. Investment banking revenue rose 61%.
BHP Billiton, the world's largest mining company, said it plans to acquire Petrohawk Energy for $12.1 billion in cash. The purchase will give BHP access to large shale assets in Texas and Louisiana. The deal, one of the largest of the year, will double BHP's resource base in oil and natural gas.
ConocoPhillips to split oil businesses
ConocoPhillips is splitting its oil refining and production businesses into separate publicly traded companies. The decision makes Conoco the latest energy company to bow to the stock market's preference for standalone exploration and production companies in an industry that once believed that bigger was better. Marathon Oil, El Paso, and Williams have already moved to separate exploration and production businesses from the rest of their operations.
News Corp. abandons bid for British Sky Broadcasting
News Corp. abandoned its £8.3 billion bid to take full control of British Sky Broadcasting as the company remains mired in a phone-hacking scandal. Last week that scandal led Rupert Murdoch to close its popular tabloid News of the World.
Google's profits jump 36%
Google reported a stronger-than-expected 36% jump in second-quarter profits as revenues rose to a record level. Google benefitted throughout the quarter from strength in its core search business. It also gained traction with its new operations, including its new social network Google+.
Friday, July 1, 2011
U.S. Economic News Week Ending July 1, 2011
Stocks logged significant gains this week after the Greek parliament's approval of an austerity plan opened the way to a European bailout and eased investor worries over a Greek debt default. Positive U.S. economic news added to the upbeat mood.
Global economic news
Greece approves austerity measures
On Thursday Greek Prime Minister George Papandreou won a second vote from lawmakers to implement his 78 billion package of budget cuts, asset sales, and tax hikes. The package qualifies the country to receive the next tranche of aid from the European Union. Deutsche Bank and Allianz, Germany's largest bank and insurer, were among the country's firms that agreed to reinvest in Greek debt to help avoid the euro area's first default. They agreed to roll over at least 2 billion of Greek bonds maturing in 2014. German and French lenders are the largest foreign holders of Greek debt, and their participation may help the European Union meet a goal of getting banks to roll over at least 30 billion worth of bonds.
IMF says global markets will suffer if the United States fails to raise debt ceiling
The International Monetary Fund said global markets will suffer if the U.S. Congress does not approve an increase in the $14.3 trillion debt ceiling. It also cautioned about the risk of a sudden increase in interest rates or a sovereign downgrade if lawmakers fail to reach a budget and debt compromise. U.S. Democrats and Republicans have been negotiating to find a way to cut the long-term deficit and raise the nation's $14.3 trillion debt ceiling. In April, Standard & Poor's put the U.S. government on notice that it risks losing its top credit rating if policymakers do not agree on a plan by 2013 to reduce budget deficits and the national debt. Moody's Investors Service in June said that it would put the U.S. government's "Aaa" rating under review for a downgrade unless there is progress on increasing the limit by mid-July. August 2 is the "hard deadline" on which the United States will no longer be able to meet all of its debt obligations, according to President Barack Obama.
Euro gets boost from expectations of ECB rate hike
The euro hit its highest level in nearly three weeks on bets that the European Central Bank will raise interest rates next week to curb inflation. ECB President Jean-Claude Trichet signaled that officials are determined to raise borrowing costs next week with risks to price stability on the upside. "We are in a state of strong vigilance, and we stand ready to act in a firm and timely manner to avoid that recent price developments give rise to broad-based inflationary pressures over the medium term," Trichet said this week.
Manufacturing slows globally, rises unexpectedly in United States
Manufacturing slowed globally as weakening U.S. growth and Europe's debt crisis damped demand for goods. China's factory index fell to the lowest level since 2009, and in the 17-nation euro area, the gauge dropped to an 18-month low. German manufacturing expanded at the weakest pace in 17 months. Manufacturing increased at the slowest pace in nine months in India, and contracted in Italy, Ireland, Spain, and Greece. On Friday, however, the Institute for Supply Management reported that U.S. manufacturing growth unexpectedly picked up in June.
Italy passes budget cuts in hopes of avoiding debt contagion
The Italian cabinet passed Prime Minister Silvio Berlusconi's proposal of 47 billion in deficit- cutting measures intended to balance the budget by 2014. The cuts are an effort to shield Italy from the debt-crisis contagion. Italy still faces a possible downgrade according to an e-mail from Standard & Poor's on Friday.
Japan's Tankan survey shows corporate sentiment fell sharply after earthquake and tsunami
The Bank of Japan's quarterly Tankan survey showed that Japanese corporate sentiment fell sharply in the aftermath of the March 11 earthquake; the closely watched index for large manufacturers dropped for the first time in over a year. However, large Japanese companies said they will boost capital spending 4.2% in fiscal 2011. A separate report showed Japan's industrial production rose at the fastest pace in more than 50 years led by carmakers as they restored plant operations after the tsunami and earthquake.
IMF names Lagarde to managing director post
The International Monetary Fund named French Finance Minister Christine Lagarde as its next managing director. Lagarde is the first woman and the eleventh consecutive European to lead the institution considered to be the world's emergency lender. She takes the reins after the resignation of Dominique Strauss-Kahn, who was released from house arrest on Friday as the sexual assault case against him began to unravel.
U.S. home prices slow pace of decline
U.S. home prices slowed their pace of decline in April. Prices rose 0.7% in April compared with March according to the Standard & Poor's Case-Shiller 20-city home price indices. Foreclosures and bruised consumer confidence continue to weigh on the housing market however.
Corn prices drop
Corn fell more than 10% in two days this week after the U.S. Department of Agriculture said U.S. farmers planted a bigger crop than analysts were expecting.
U.S. and global corporate news
Toyota and Honda sales fall in Japan
Toyota Motor and Honda Motor led a 23% drop in domestic vehicle sales, a tenth straight monthly decline, after the nation's earthquake disrupted production. Toyota's deliveries dropped 28% from a year earlier. Sales at Honda dropped 32%.
BJ's Wholesale sold
BJ's Wholesale Club agreed to be bought by Leonard Green & Partners and CVC Capital Partners for about $2.8 billion. The transaction, which is subject to shareholder approval, is expected to close in the fourth quarter.
BYD jumps 41% in trading debut
BYD, the Chinese automaker partially owned by investor Warren Buffett's Berkshire Hathaway, jumped 41% in its trading debut in Shenzen.
NewsCorp sells Myspace
The Wall Street Journal reported that NewsCorp sold music and entertainment Web site Myspace to Specific Media, a little-known ad-targeting firm, for $35 million in cash and stock. The one-time popular Internet site was acquired six years ago for $580 million.
Global economic news
Greece approves austerity measures
On Thursday Greek Prime Minister George Papandreou won a second vote from lawmakers to implement his 78 billion package of budget cuts, asset sales, and tax hikes. The package qualifies the country to receive the next tranche of aid from the European Union. Deutsche Bank and Allianz, Germany's largest bank and insurer, were among the country's firms that agreed to reinvest in Greek debt to help avoid the euro area's first default. They agreed to roll over at least 2 billion of Greek bonds maturing in 2014. German and French lenders are the largest foreign holders of Greek debt, and their participation may help the European Union meet a goal of getting banks to roll over at least 30 billion worth of bonds.
IMF says global markets will suffer if the United States fails to raise debt ceiling
The International Monetary Fund said global markets will suffer if the U.S. Congress does not approve an increase in the $14.3 trillion debt ceiling. It also cautioned about the risk of a sudden increase in interest rates or a sovereign downgrade if lawmakers fail to reach a budget and debt compromise. U.S. Democrats and Republicans have been negotiating to find a way to cut the long-term deficit and raise the nation's $14.3 trillion debt ceiling. In April, Standard & Poor's put the U.S. government on notice that it risks losing its top credit rating if policymakers do not agree on a plan by 2013 to reduce budget deficits and the national debt. Moody's Investors Service in June said that it would put the U.S. government's "Aaa" rating under review for a downgrade unless there is progress on increasing the limit by mid-July. August 2 is the "hard deadline" on which the United States will no longer be able to meet all of its debt obligations, according to President Barack Obama.
Euro gets boost from expectations of ECB rate hike
The euro hit its highest level in nearly three weeks on bets that the European Central Bank will raise interest rates next week to curb inflation. ECB President Jean-Claude Trichet signaled that officials are determined to raise borrowing costs next week with risks to price stability on the upside. "We are in a state of strong vigilance, and we stand ready to act in a firm and timely manner to avoid that recent price developments give rise to broad-based inflationary pressures over the medium term," Trichet said this week.
Manufacturing slows globally, rises unexpectedly in United States
Manufacturing slowed globally as weakening U.S. growth and Europe's debt crisis damped demand for goods. China's factory index fell to the lowest level since 2009, and in the 17-nation euro area, the gauge dropped to an 18-month low. German manufacturing expanded at the weakest pace in 17 months. Manufacturing increased at the slowest pace in nine months in India, and contracted in Italy, Ireland, Spain, and Greece. On Friday, however, the Institute for Supply Management reported that U.S. manufacturing growth unexpectedly picked up in June.
Italy passes budget cuts in hopes of avoiding debt contagion
The Italian cabinet passed Prime Minister Silvio Berlusconi's proposal of 47 billion in deficit- cutting measures intended to balance the budget by 2014. The cuts are an effort to shield Italy from the debt-crisis contagion. Italy still faces a possible downgrade according to an e-mail from Standard & Poor's on Friday.
Japan's Tankan survey shows corporate sentiment fell sharply after earthquake and tsunami
The Bank of Japan's quarterly Tankan survey showed that Japanese corporate sentiment fell sharply in the aftermath of the March 11 earthquake; the closely watched index for large manufacturers dropped for the first time in over a year. However, large Japanese companies said they will boost capital spending 4.2% in fiscal 2011. A separate report showed Japan's industrial production rose at the fastest pace in more than 50 years led by carmakers as they restored plant operations after the tsunami and earthquake.
IMF names Lagarde to managing director post
The International Monetary Fund named French Finance Minister Christine Lagarde as its next managing director. Lagarde is the first woman and the eleventh consecutive European to lead the institution considered to be the world's emergency lender. She takes the reins after the resignation of Dominique Strauss-Kahn, who was released from house arrest on Friday as the sexual assault case against him began to unravel.
U.S. home prices slow pace of decline
U.S. home prices slowed their pace of decline in April. Prices rose 0.7% in April compared with March according to the Standard & Poor's Case-Shiller 20-city home price indices. Foreclosures and bruised consumer confidence continue to weigh on the housing market however.
Corn prices drop
Corn fell more than 10% in two days this week after the U.S. Department of Agriculture said U.S. farmers planted a bigger crop than analysts were expecting.
U.S. and global corporate news
Toyota and Honda sales fall in Japan
Toyota Motor and Honda Motor led a 23% drop in domestic vehicle sales, a tenth straight monthly decline, after the nation's earthquake disrupted production. Toyota's deliveries dropped 28% from a year earlier. Sales at Honda dropped 32%.
BJ's Wholesale sold
BJ's Wholesale Club agreed to be bought by Leonard Green & Partners and CVC Capital Partners for about $2.8 billion. The transaction, which is subject to shareholder approval, is expected to close in the fourth quarter.
BYD jumps 41% in trading debut
BYD, the Chinese automaker partially owned by investor Warren Buffett's Berkshire Hathaway, jumped 41% in its trading debut in Shenzen.
NewsCorp sells Myspace
The Wall Street Journal reported that NewsCorp sold music and entertainment Web site Myspace to Specific Media, a little-known ad-targeting firm, for $35 million in cash and stock. The one-time popular Internet site was acquired six years ago for $580 million.
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