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.
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