Expectations of more quantitative easing by the U.S. Federal Reserve Board drove financial markets this week. Gold hit a record high of $1,387 per ounce on Thursday amid expectations that Fed actions would keep interest rates low. The U.S. dollar continued to take a beating as concern rose that lower rates would erode its value. The U.S. currency fell against most of its counterparts. It dropped to a record low against the Swiss franc and fell below 81 yen for the first time since April 1995. It also hit parity with the Australian and Canadian dollars as investors sought currencies of nations with higher-returning assets.
U.S. economic news
Bernanke says further stimulus may be needed
Fed Chairman Ben Bernanke made the case on Friday for new steps by the Fed to boost economic growth, saying that inflation was running below the Fed's objective of 2% and that the economy was on a course to grow too slowly to bring down unemployment. The comments came as the Fed considers whether to restart a program of purchasing long-term Treasury bonds to push down long-term interest rates to boost growth. The central bank meets November 2 to 3.
Price indices confirm tame U.S. inflation
The consumer and producer price indices both pointed to tame inflation in September. The seasonally adjusted consumer price index rose by 0.1% from August, according to the U.S. Department of Labor. The core rate, which is more closely watched by the Fed, was unchanged in September. Underlying inflation is running below the Fed's informal target of between 1.7% and 2.0% because of the weak economy. The producer price index increased 0.4% last month. The core index increased 0.1%. It was the second month in a row that this core index, which excludes volatile food and energy prices, rose. The pace of the increase suggests that limited demand is restraining inflation.
Trade deficit widens
The U.S. trade deficit widened to $46.3 billion in August as imports soared. The gap was fueled by a record deficit with China and a weak showing for U.S. exports.
Retail sales rise
Retail sales rose 0.6% in September, more than the 0.4% gain expected. It was the third month in a row that sales rose. The increase helped ease concern of a further weakening of consumer spending.
Jobless claims rise
The number of Americans filing first-time applications for unemployment benefits unexpectedly increased last week. Jobless claims rose by 13,000 to 462,000 in the week ended October 9. The total number of people on unemployment insurance rolls decreased to the lowest level since November 2008, while those getting extended benefits declined.
U.S. and global corporate news
Google's profit rose 32% in the third quarter as display-ad and mobile businesses bolstered the company's core internet search ad sales.
General Electric's earnings fell 18% in the third quarter as it added $1.1 billion to reserves for a charge related to the 2008 sale of its Japanese consumer-finance business. Revenue slipped 5% from the year-earlier period. GE cited lower equipment sales as the reason for the decline.
Winnebago Industries reported profit for the fiscal fourth quarter as revenues more than doubled and cost cutting continued to pay off. The recreational vehicle market returned to profitability in the recent quarters after recovering from an industry crisis that caused competitors to file for bankruptcy and leave the business.
LVMH Moët Hennessy Louis Vuitton, the French luxury goods maker, reported a 24% increase in third-quarter sales with all divisions posting double-digit growth. The sales report confirms the strong rebound of luxury products.
Global economic news
China's foreign currency holdings rise at rapid pace
China's central bank reported that its foreign currency holdings rose by nearly $200 billion from July to September. The rapid accumulation is seen as the result of the central bank's efforts to prevent the yuan from rising in value, a policy that helps keep the country's exports comparatively cheap.
Eurozone exports, industrial production point to steady recovery
European exports increased 1% in August as the eurozone manages to weather the global slowdown and a stronger euro. Inflation accelerated to 1.8%, the highest level since November 2008. Meanwhile industrial production in the region rose more than expected in August, a sign that the industrial sector continued to support recovery in the third quarter.
Friday, October 15, 2010
Friday, October 8, 2010
U.S. Economic News Week Ending October 8, 2010
U.S. and global stock markets held steady this week as attention turned to mounting tensions in currency markets. The U.S. dollar hit fresh lows against several currencies, raising pressure on global leaders to address issues that have emerged as countries attempt to keep their currencies weak to boost exports. For the first time in years, currencies will be the leading topic of discussions for leaders gathering in Washington at the annual meeting of the International Monetary Fund. The rise of currencies such as the Japanese yen and Australian dollar threatens to derail economic recoveries and global cooperation. Investors have increasingly speculated about the possibility of a global agreement designed to stabilize currency markets and manage an orderly decline of the dollar.
U.S. economic news
Economy sheds more jobs than expected
The U.S. economy shed more jobs than expected in September as government payrolls declined by 159,000. Overall, employers cut staffing by 95,000 workers, a jump from the 75,000 workers let go in August. Private payrolls that exclude government agencies climbed 64,000, a lower number than forecast. The unemployment rate remained at 9.6%. The average work week held at 34.2 hours.
U.S. data show mixed recovery
Other data released this week showed a U.S. economy still on the course of an uneven recovery. Factory orders dropped more than expected in August. The decline was the third in the past four months. Commercial airplanes drove the decease; excluding transportation, all other factory orders rose. There were, however, positives in the report. A barometer of capital spending increased, and non-defense capital goods orders, excluding airplanes, rose by 5.1%. Meanwhile, the U.S. service sector expanded in September, allaying some of the fears that the economy could slip back into recession as manufacturing cools. An index based on a survey of U.S. purchasing managers at nonmanufacturing firms rose to 53.2 in September, from 51.5 in August, the Institute for Supply Management reported. Service sector firms account for two-thirds of the economy and employ four of every five private sector workers in the United States.
Also this week, the National Association of Realtors Pending Home Sales Index increased 4.3% to 82.3 for August. Year over year the index was 20.1% below its level of 103 in August 2009, and consumer credit fell $3.3 billion in August from July to $2.414 trillion, the lowest level since early 2007. The decline was driven by a $5 billion drop in credit-card and other revolving credit to $822.2 billion. Car loans and other non-revolving credit rose $1.7 billion to $1.592 trillion.
U.S. and global corporate news
Alcoa kicks off earnings season with 21% drop in profits
Alcoa's profit fell 21% on higher operating expenses, even as sales benefited from higher prices and rising world demand for metals. Alcoa was the first Dow Jones Industrial Average company to report third-quarter results.
American, British Air, and Iberia launch trans-Atlantic venture
In an effort to compete with rivals and defend market share, American Airlines, British Airways, and Spain's Iberia Airlines forged a trans-Atlantic joint venture. International joint ventures have picked up as many countries keep foreign ownership limits on airlines and three major global alliances — Star Alliance, SkyTeam, and Oneworld — battle for the upper hand on cross-continental routes.
Renault sells 14.9% stake in Volvo
Renault, the second-largest car maker in France, sold a 14.9% stake in Volvo.
Global economic news
IMF reports stronger-than-expected growth for the first half of the year
The International Monetary Fund reported this week that growth in the first half of the year has turned out slightly stronger than it had expected with the global economy expanding at an annualized 5.25% rate.
ECB and BOE keep rates unchanged
The European Central Bank and Bank of England both held interest rates unchanged this week. Speaking before the meeting of the Group of Seven this week, ECB President Jean-Claude Trichet said he opposes disorderly currency moves as concerns about "currency wars" mount. Worries about such wars have risen as countries around the world take measures to devalue currencies and loosen monetary policy to safeguard export-led growth.
German exports fall for second month in a row
German exports fell in August for the second month as a strengthening euro and slowing global growth curbed demand. The decline comes after exports helped growth in Europe's largest economy accelerate in the second quarter at the fastest pace in two decades.
U.S. economic news
Economy sheds more jobs than expected
The U.S. economy shed more jobs than expected in September as government payrolls declined by 159,000. Overall, employers cut staffing by 95,000 workers, a jump from the 75,000 workers let go in August. Private payrolls that exclude government agencies climbed 64,000, a lower number than forecast. The unemployment rate remained at 9.6%. The average work week held at 34.2 hours.
U.S. data show mixed recovery
Other data released this week showed a U.S. economy still on the course of an uneven recovery. Factory orders dropped more than expected in August. The decline was the third in the past four months. Commercial airplanes drove the decease; excluding transportation, all other factory orders rose. There were, however, positives in the report. A barometer of capital spending increased, and non-defense capital goods orders, excluding airplanes, rose by 5.1%. Meanwhile, the U.S. service sector expanded in September, allaying some of the fears that the economy could slip back into recession as manufacturing cools. An index based on a survey of U.S. purchasing managers at nonmanufacturing firms rose to 53.2 in September, from 51.5 in August, the Institute for Supply Management reported. Service sector firms account for two-thirds of the economy and employ four of every five private sector workers in the United States.
Also this week, the National Association of Realtors Pending Home Sales Index increased 4.3% to 82.3 for August. Year over year the index was 20.1% below its level of 103 in August 2009, and consumer credit fell $3.3 billion in August from July to $2.414 trillion, the lowest level since early 2007. The decline was driven by a $5 billion drop in credit-card and other revolving credit to $822.2 billion. Car loans and other non-revolving credit rose $1.7 billion to $1.592 trillion.
U.S. and global corporate news
Alcoa kicks off earnings season with 21% drop in profits
Alcoa's profit fell 21% on higher operating expenses, even as sales benefited from higher prices and rising world demand for metals. Alcoa was the first Dow Jones Industrial Average company to report third-quarter results.
American, British Air, and Iberia launch trans-Atlantic venture
In an effort to compete with rivals and defend market share, American Airlines, British Airways, and Spain's Iberia Airlines forged a trans-Atlantic joint venture. International joint ventures have picked up as many countries keep foreign ownership limits on airlines and three major global alliances — Star Alliance, SkyTeam, and Oneworld — battle for the upper hand on cross-continental routes.
Renault sells 14.9% stake in Volvo
Renault, the second-largest car maker in France, sold a 14.9% stake in Volvo.
Global economic news
IMF reports stronger-than-expected growth for the first half of the year
The International Monetary Fund reported this week that growth in the first half of the year has turned out slightly stronger than it had expected with the global economy expanding at an annualized 5.25% rate.
ECB and BOE keep rates unchanged
The European Central Bank and Bank of England both held interest rates unchanged this week. Speaking before the meeting of the Group of Seven this week, ECB President Jean-Claude Trichet said he opposes disorderly currency moves as concerns about "currency wars" mount. Worries about such wars have risen as countries around the world take measures to devalue currencies and loosen monetary policy to safeguard export-led growth.
German exports fall for second month in a row
German exports fell in August for the second month as a strengthening euro and slowing global growth curbed demand. The decline comes after exports helped growth in Europe's largest economy accelerate in the second quarter at the fastest pace in two decades.
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