In a fairly volatile week, optimism rose along with expectations that Ireland’s economic woes would be eased through a cash injection from the International Monetary Fund (IMF) and European Union. The anticipation of action that would stave off a worsening economic crisis caused the euro to rally and helped boost stock markets globally after many markets had dipped earlier in the week. Rising profits among U.S. blue chip firms and some mildly positive economic indicators also fed investor optimism. However, action by China to counter inflation weighed down markets on anticipated diminished demand for commodities.
In the United States, the consumer and producer inflation gauges both had benign readings, indicating that the U.S. Federal Reserve Board could have sufficient leeway to inject economic stimulus measures without sparking a rise in prices. Overall, broad global equity indices ended the week mostly unchanged. U.S. Treasury yields were mostly flat, except for the 10-year Treasury note, which rose as investors began to feel more confident about Ireland as well as the U.S. economy.
U.S. economic news
Inflation at lowest level since 1957
Two key inflation gauges showed muted price movements in October. The U.S. Department of Labor reported that the seasonally-adjusted consumer price index (CPI) rose 0.2% from September and 1.2% from October 2009. The core inflation rate excluding food and energy prices was unchanged from September and rose 0.6% from a year earlier.
Meanwhile, wholesale prices remained under control. The Producer Price Index (PPI), which measures how much manufacturers pay for goods and services, rose a seasonally adjusted 0.4% for finished goods in October from September, and 4.3% from a year ago. However, the core index, without food and energy prices included, declined 0.6% last month, in its sharpest monthly drop in four years. The core index was up just 1.5% year over year.
Retail sales rise 1.2%
U.S. consumers appeared to be loosening their purse strings, as retail sales increased 1.2% in October, the fourth consecutive month of rising spending and the largest monthly increase since March. Retail sales risen to their highest level since August 2008.
Fed to require bank capital plans
All 19 banks that went through stress tests in early 2009 will have to submit capital plans to the Fed early next year to demonstrate their ability to withstand losses. This initiative is part of the Fed’s efforts to bolster bank supervision in the wake of the financial crisis and make sure large banks are on solid financial ground.
U.S. mortgage delinquencies decline
The rate of U.S. mortgage delinquencies fell in the third quarter of 2010, though still remained quite high. According to the Mortgage Bankers Association, the delinquency rate on single-family homes fell to 9.13%, a drop of 0.72 percentage points. The percentage of loans in foreclosure proceedings fell to 4.39% from 4.57%.
U.S. jobless claims rise slightly
The number of U.S. workers filing first-time claims for unemployment insurance rose 2,000 to 439,000 in the week ended November 13, the U.S. Department of Labor reported. Meanwhile, the four-week moving average of initial claims fell 4,000 to 443,000, its lowest level since September 2008.
U.S. and global corporate news
GM revs up finances with IPO
In the second largest U.S. initial public offering ever, General Motors raised $15.8 billion through common shares in its offering, selling 478 million shares at $33 per share, a higher-than-expected price. Counting additional shares that underwriters may exercise their right to sell, the total common stock sale could reach $18.1 billion. GM also raised $4.35 billion in preferred shares as the automaker sought to re-establish its financial independence after being bailed out by the federal government last year.
Big box stores in the black
A number of high-profile large companies posted third-quarter profits. Wal-Mart’s third-quarter earnings climbed 9.3% on strong international operations, but same-store sales in the U.S. fell for the sixth consecutive quarter, reflecting tight spending by low-income earners.
Home Depot’s earnings jumped 21% as cost controls and share repurchases offset the impact of the weak U.S. economy. The home improvement retailer also boosted its profit expectations for the year. Competing firm Lowe’s also reported rising profits, with earnings up 17% after reduced discounts and increased sales of private-label profits helped offset a shortfall in overall sales. In contrast to Home Depot, Lowe’s reduced its full-year outlook.
Sears loss widens while Penney’s profit soars
Sears Holdings’ third-quarter loss grew as sales fell substantially and the retailer continued to lose business to rivals. Comparable-store sales at Sears’ namesake stores declined by 8.2% while the company’s Kmart stores comparable-store sales fell just 0.7%, leading to a small profit within the division. In contrast, J.C.Penney’s third-quarter earnings rose 63% under improving sales conditions. However, the retailer’s inventory rose 6.2% from a year ago, and its gross margin, which indicates profitability, fell slightly.
Global economic news
Irish economic rescue package imminent
The Irish government, despite its distaste for depending on foreign financing, indicated that it would accept an international bailout to rescue its troubled banking industry. Late in the week, the government was negotiating a loan package with the IMF and European Union. Details of the loan, reportedly in the tens of billions of euros, were still being finalized. The Central Bank of Ireland said Friday that largely technical discussions with international delegations would continue for days to come.
China acts to curb inflation
The Chinese government made two decisive moves to counter inflation this week, with China’s State Council announcing Wednesday that it would limit price increases on a wide range of products, including grain, oil, sugar and cotton. On Friday, China increased bank reserve requirements for the second time in two weeks, essentially withdrawing cash from the banking system. Last week, official data showed China’s consumer price index rose 4.4% year over year in October, its fastest pace in two years and above the targeted 3% inflation rate for 2010.
Spanish economy stalls; bond sales ease fears
Spain’s economy continued to struggle in the third quarter, as its gross domestic product remained unchanged from the previous quarter and up just 0.3% from a year earlier, according to the country’s National Statistics Institute. Sales of close to $5 billion (3.65 billion euros) of long-term bonds on Thursday paid higher yields than two months ago, resulting in a higher level of confidence in the country’s weak economy and troubled banking sector.
Germany’s economic indicators are positive
German economic expectations rose more than expected in November. A closely watched economic-expectations index increased to 1.8 points in November from -7.2 points in October. The increase followed six consecutive months of decline. Additionally, a Centre for European Economic Research survey of analysts and institutional investors jumped 8.9 points to 82.5 points.
Eurozone inflation rises
Inflation in the 16 countries that use the euro climbed at the fastest rate in almost two years in October. Eurostat reported that consumer prices rose by 0.4% from September to October, and by 1.9% from a year earlier. The core rate of inflation excluding the prices for food and energy stood at 1.1% in October.
Saturday, November 20, 2010
Friday, November 12, 2010
U.S. economic News Week Ending November 12, 2010
U.S. bond markets were closed on Thursday in honor of Veterans Day. Stocks were mostly down for the week amid renewed concerns about European sovereign debt, especially that of Ireland and Portugal, and harsh criticism worldwide of the U.S. Federal Reserve Board’s latest injection of money into the economy.
Commodity prices soared this week, partly in reaction to the Fed’s stimulus plans and also on strong demand for raw materials from emerging markets. Gold prices continued their climb, reaching a new high of $1,410 per ounce, and copper prices also hit an all-time high.
U.S. economic news
Trade gap narrows more than expected
The U.S. trade gap fell 5.3% to $44 billion in September from $46.5 billion in August, according to the U.S. Department of Commerce. The trade deficit is $379.1 billion year to date, up 40% from the same period last year. U.S. exports were $154.1 billion in September, their highest level in over two years. Imports were $198.1 billion for the month. Exports were boosted by service-sector exports and a weak U.S. dollar.
New jobless claims drop to lowest level since July
The U.S. Department of Labor said that the number of first-time filers for unemployment benefits decreased 24,000 to 435,000 in the week ended November 6. The decline brings new jobless claims to their lowest level in four months. The better-than-expected weekly numbers follow last week’s optimistic jobs report, which said 151,000 workers were added to nonfarm payrolls in October.
Federal commission proposes $4 trillion in deficit cuts
The federal government’s 18-member fiscal commission released a preliminary report that recommends reducing the deficit by $4 trillion over the next 10 years. The report, which has drawn criticism from the political left and the right, calls for significant spending cuts beginning in 2012, including cuts in Social Security benefits, reductions in domestic and defense spending, and the elimination of popular tax breaks. The commission will make its formal recommendations to President Obama on December 1.
U.S. and global corporate news
Third-quarter earnings continued to climb, with nearly 75% of companies in the Standard & Poor’s 500 Stock Index reporting profits that are up significantly from a year ago.
General Motors contributed to the quarter’s overall positive earnings results by reporting a profit of $1.96 billion as revenue rose 20%. It was the automaker’s third-straight quarterly profit and its best quarter since 1999. The latest results were a marked turnaround from the $1.2 billion loss the company posted a year ago. GM’s earnings report was released ahead of next week’s planned initial public offering — the first time the company is selling shares to the public since it emerged from bankruptcy in July 2009.
Macy’s posted a profit of $10 million for the period ended October 30, compared with a prior-year loss of $35 million. The company has benefited from prior consolidations of its divisions, the introduction of several new brands, and a strategy to tailor its offerings to local markets. The turnaround for the department store operator could be a positive sign for retailers, as Macy’s typically kicks off the earnings season for major retailers and is seen by many analysts as a barometer of consumer spending.
Cisco Systems reported solid quarterly results but issued a weak sales forecast for the second straight quarter. The computer network equipment maker projected its revenue will increase by less than half of what analysts had projected for its November through January quarter. That disappointing outlook triggered a selloff in technology companies on Thursday.
Global economic news
Tensions high, expectations low as G-20 summit convenes
World leaders met for the Group of 20 Summit in Seoul, South Korea, this week to debate international trade imbalances and develop plans to support a global recovery. Major topics discussed during the two-day summit included currency manipulation, trade gaps, and protectionism. The United States faced a number of setbacks throughout the meetings as President Obama was unable to secure a bilateral free trade agreement with South Korea. The United States was also the target of severe criticism from a number of countries, including China, Japan, Russia, Germany, and the eurozone following the Fed’s controversial decision last week to buy $600 billion in U.S. Treasury securities over an eight-month period.
U.S. delegation faces roadblocks in Seoul, especially with China
The United States entered the trade gap discussions at a significant disadvantage. While the U.S. trade gap narrowed slightly to $44 billion in September, China announced a huge trade surplus, $27.2 billion in October, up a staggering 61% from September. The widening trade gap has only heightened tensions between the two countries. The United States was unsuccessful in pressuring China’s President Hu Jintao on the importance of currency revaluation, in part because of the Fed’s second round of quantitative easing. China believes the Fed’s latest move will lead to continued depreciation of the U.S. dollar and an eventual creditor crisis. As a result, the state-backed Dagong Global Credit Rating Co. on Tuesday downgraded its credit rating for the United States to “A+” from “AA.”
Leaders of the G-20 nations, despite failing to agree on definitive recovery steps, particularly on the U.S.-China currency dispute, outlined a number of macroeconomic policies and agreed to “refrain” from all-out currency warfare.
China inflation rate hits 25-month high
China’s inflation rate jumped to 4.4% in October, according to a Beijing statistics bureau report. The increase was due largely to a 10.1% increase in food prices. The increase exceeded the country’s official target rate of 3.0% and was a significant jump from September’s 3.6% rate. Although inflation has so far been restricted to food, price increases could spread as funds from Beijing’s economic stimulus measures and a surge in bank lending begin to impact the economy.
Commodity prices soared this week, partly in reaction to the Fed’s stimulus plans and also on strong demand for raw materials from emerging markets. Gold prices continued their climb, reaching a new high of $1,410 per ounce, and copper prices also hit an all-time high.
U.S. economic news
Trade gap narrows more than expected
The U.S. trade gap fell 5.3% to $44 billion in September from $46.5 billion in August, according to the U.S. Department of Commerce. The trade deficit is $379.1 billion year to date, up 40% from the same period last year. U.S. exports were $154.1 billion in September, their highest level in over two years. Imports were $198.1 billion for the month. Exports were boosted by service-sector exports and a weak U.S. dollar.
New jobless claims drop to lowest level since July
The U.S. Department of Labor said that the number of first-time filers for unemployment benefits decreased 24,000 to 435,000 in the week ended November 6. The decline brings new jobless claims to their lowest level in four months. The better-than-expected weekly numbers follow last week’s optimistic jobs report, which said 151,000 workers were added to nonfarm payrolls in October.
Federal commission proposes $4 trillion in deficit cuts
The federal government’s 18-member fiscal commission released a preliminary report that recommends reducing the deficit by $4 trillion over the next 10 years. The report, which has drawn criticism from the political left and the right, calls for significant spending cuts beginning in 2012, including cuts in Social Security benefits, reductions in domestic and defense spending, and the elimination of popular tax breaks. The commission will make its formal recommendations to President Obama on December 1.
U.S. and global corporate news
Third-quarter earnings continued to climb, with nearly 75% of companies in the Standard & Poor’s 500 Stock Index reporting profits that are up significantly from a year ago.
General Motors contributed to the quarter’s overall positive earnings results by reporting a profit of $1.96 billion as revenue rose 20%. It was the automaker’s third-straight quarterly profit and its best quarter since 1999. The latest results were a marked turnaround from the $1.2 billion loss the company posted a year ago. GM’s earnings report was released ahead of next week’s planned initial public offering — the first time the company is selling shares to the public since it emerged from bankruptcy in July 2009.
Macy’s posted a profit of $10 million for the period ended October 30, compared with a prior-year loss of $35 million. The company has benefited from prior consolidations of its divisions, the introduction of several new brands, and a strategy to tailor its offerings to local markets. The turnaround for the department store operator could be a positive sign for retailers, as Macy’s typically kicks off the earnings season for major retailers and is seen by many analysts as a barometer of consumer spending.
Cisco Systems reported solid quarterly results but issued a weak sales forecast for the second straight quarter. The computer network equipment maker projected its revenue will increase by less than half of what analysts had projected for its November through January quarter. That disappointing outlook triggered a selloff in technology companies on Thursday.
Global economic news
Tensions high, expectations low as G-20 summit convenes
World leaders met for the Group of 20 Summit in Seoul, South Korea, this week to debate international trade imbalances and develop plans to support a global recovery. Major topics discussed during the two-day summit included currency manipulation, trade gaps, and protectionism. The United States faced a number of setbacks throughout the meetings as President Obama was unable to secure a bilateral free trade agreement with South Korea. The United States was also the target of severe criticism from a number of countries, including China, Japan, Russia, Germany, and the eurozone following the Fed’s controversial decision last week to buy $600 billion in U.S. Treasury securities over an eight-month period.
U.S. delegation faces roadblocks in Seoul, especially with China
The United States entered the trade gap discussions at a significant disadvantage. While the U.S. trade gap narrowed slightly to $44 billion in September, China announced a huge trade surplus, $27.2 billion in October, up a staggering 61% from September. The widening trade gap has only heightened tensions between the two countries. The United States was unsuccessful in pressuring China’s President Hu Jintao on the importance of currency revaluation, in part because of the Fed’s second round of quantitative easing. China believes the Fed’s latest move will lead to continued depreciation of the U.S. dollar and an eventual creditor crisis. As a result, the state-backed Dagong Global Credit Rating Co. on Tuesday downgraded its credit rating for the United States to “A+” from “AA.”
Leaders of the G-20 nations, despite failing to agree on definitive recovery steps, particularly on the U.S.-China currency dispute, outlined a number of macroeconomic policies and agreed to “refrain” from all-out currency warfare.
China inflation rate hits 25-month high
China’s inflation rate jumped to 4.4% in October, according to a Beijing statistics bureau report. The increase was due largely to a 10.1% increase in food prices. The increase exceeded the country’s official target rate of 3.0% and was a significant jump from September’s 3.6% rate. Although inflation has so far been restricted to food, price increases could spread as funds from Beijing’s economic stimulus measures and a surge in bank lending begin to impact the economy.
Friday, November 5, 2010
U.S. Economic News Week Ending November 5, 2010
Stocks rallied this week to the highest level in more than two years as investors applauded the U.S. Federal Reserve Board's efforts to stimulate the U.S. economy, a better-than-expected U.S. employment report, and strong corporate profits.
U.S. economic news
Fed details more quantitative easing plans
On Wednesday, the Fed announced that it would purchase an additional $600 billion of longer-term Treasury securities by June in a second round of quantitative easing. The central bank said it would also keep reinvesting principal payments from its securities holdings. Demand for Treasuries jumped on the news and pushed the yield of the two-year and five-year notes down to record lows.
Employment rises more than expected
Employment rose more than expected in October, bolstering optimism about the economic recovery. Payrolls climbed by 151,000 jobs, and the jobless rate held at 9.6%. The report also showed gains in hours worked and earnings. Average hourly earnings increased 1.7% in October from the same month last year. The numbers brought increased optimism that improvement in the labor market will boost household spending.
Data show uneven recovery
Other economic news from October continued to point to an uneven recovery. The Institute for Supply Management reported that manufacturing and service sector activity picked up. U.S. productivity exceeded expectations and rose at a 1.9% annual rate in the third quarter. U.S. retailers posted mixed results, with luxury apparel faring well.
U.S. and global corporate news
EPS top estimates at 77% of companies
Earnings per share have topped estimates at about 77% of the companies in the Standard & Poor's 500 Stock Index reporting since October 7, according to data compiled by Bloomberg. Net income has increased 32% for the group amid 9.8% growth in sales.
BNP posts 46% profit increase
BNP Paribas reported a 46% increase in third-quarter profits amid strong growth in its consumer banking networks.
American International Group posted a $2.4 billion net loss for the third quarter because of various restructuring charges totaling $4.5 billion. Its main insurance business, however, improved from a year ago.
Toyota Motor posted a lower-than-expected increase in fiscal second-quarter profit but raised its full-year outlook as operating income gains in Asia offset continued losses in Europe and Japan. Nissan Motor and Honda Motor also raised their full-year earnings forecasts this week but warned that the yen's rapid rise against other currencies was an ongoing risk to the bottom line.
Global economic news
ECB, BOE, BOJ hold rates steady
The European Central Bank kept interest rates at a record low of 1% for the nineteenth month, and the Bank of England left its key rate at 0.5% and maintained its asset purchase program at £200 billion. The Bank of Japan kept interest rates at ultra low levels and finalized its plan to buy exchange-traded funds and real estate investment trusts in a ¥5 trillion asset program that it first announced last month.
Australia and India increase rates
Central banks in Australia and India raised rates to stem inflation pressures. China also signaled that an increase may be imminent.
U.S. economic news
Fed details more quantitative easing plans
On Wednesday, the Fed announced that it would purchase an additional $600 billion of longer-term Treasury securities by June in a second round of quantitative easing. The central bank said it would also keep reinvesting principal payments from its securities holdings. Demand for Treasuries jumped on the news and pushed the yield of the two-year and five-year notes down to record lows.
Employment rises more than expected
Employment rose more than expected in October, bolstering optimism about the economic recovery. Payrolls climbed by 151,000 jobs, and the jobless rate held at 9.6%. The report also showed gains in hours worked and earnings. Average hourly earnings increased 1.7% in October from the same month last year. The numbers brought increased optimism that improvement in the labor market will boost household spending.
Data show uneven recovery
Other economic news from October continued to point to an uneven recovery. The Institute for Supply Management reported that manufacturing and service sector activity picked up. U.S. productivity exceeded expectations and rose at a 1.9% annual rate in the third quarter. U.S. retailers posted mixed results, with luxury apparel faring well.
U.S. and global corporate news
EPS top estimates at 77% of companies
Earnings per share have topped estimates at about 77% of the companies in the Standard & Poor's 500 Stock Index reporting since October 7, according to data compiled by Bloomberg. Net income has increased 32% for the group amid 9.8% growth in sales.
BNP posts 46% profit increase
BNP Paribas reported a 46% increase in third-quarter profits amid strong growth in its consumer banking networks.
American International Group posted a $2.4 billion net loss for the third quarter because of various restructuring charges totaling $4.5 billion. Its main insurance business, however, improved from a year ago.
Toyota Motor posted a lower-than-expected increase in fiscal second-quarter profit but raised its full-year outlook as operating income gains in Asia offset continued losses in Europe and Japan. Nissan Motor and Honda Motor also raised their full-year earnings forecasts this week but warned that the yen's rapid rise against other currencies was an ongoing risk to the bottom line.
Global economic news
ECB, BOE, BOJ hold rates steady
The European Central Bank kept interest rates at a record low of 1% for the nineteenth month, and the Bank of England left its key rate at 0.5% and maintained its asset purchase program at £200 billion. The Bank of Japan kept interest rates at ultra low levels and finalized its plan to buy exchange-traded funds and real estate investment trusts in a ¥5 trillion asset program that it first announced last month.
Australia and India increase rates
Central banks in Australia and India raised rates to stem inflation pressures. China also signaled that an increase may be imminent.
Tuesday, November 2, 2010
U.S. Economic News Week Ending October 29 2010
Stocks were mostly mixed for the week as investors reacted cautiously to a combination of encouraging and disappointing corporate earnings and economic reports. The U.S. Department of Commerce reported on Friday that the economy grew at a modest 2% in the third quarter. Investors, meanwhile, are anxiously awaiting the U.S. Federal Reserve Board’s decision next week on the final dollar amount of any additional economic stimulus measures. Making news on the commodities front, cotton prices recorded the biggest drop in 15 years, as the price of the cotton futures contract for December delivery fell 4.6% to $1.2359 per pound. It was the biggest price decline for cotton in outright terms since 1995.
U.S. economic news
Fed may take more “measured approach” with additional economic stimulus
The U.S. Federal Reserve Board’s long awaited quantitative easing policy will most likely be announced following its next policy meeting on November 3. The Wall Street Journal noted this week that the Fed is likely to buy “a few hundred billion” dollars in U.S. Treasury bonds over a period of “several months” to pressure interest rates and stimulate the economy. This amount is well below the $500 billion to $2 trillion figures that have been projected by some analysts and industry experts.
Jobless claims drop to three-month low
The U.S. Department of Labor reported this week that initial unemployment claims unexpectedly fell by 21,000 to 434,000 in the week ended October 23. This was the second weekly drop in the number of new unemployment applicants in the past two weeks. Some economists believe that the latest figures could be an indication that the job market is finally stabilizing.
New home sales climb in September
The U.S. Department of Commerce said that the number of new home sales in September grew 6.6% from August to a seasonally adjusted annual level of 307,000 units. The jump in sales is potentially good news for the battered housing market, which saw sales throughout most of the summer that were the slowest on record since 1963.
Consumer confidence edges up
According to several leading economists, concerns about the job market appear to be keeping U.S. consumer sentiment largely in check. The Conference Board’s Consumer Confidence Index increased only slightly to 50.2 in October from a revised 48.6 in September. September’s reading was the lowest since February and down sharply from 53.2 in August. A reading of 90 indicates a healthy economy.
U.S. and global corporate news
Exxon Mobil, the largest U.S. oil company by market value, reported third-quarter earnings of $7.35 billion, up from $4.73 billion a year earlier. Strong refining margins, higher commodity prices, and a 20% jump in oil production all contributed to this 55% jump in net income, surpassing analyst projections.
Ford Motor posted record third-quarter earnings gains of 70%, with net income rising to $1.7 billion from $997 million a year ago. The automaker cited a strong product line, momentum in North America, and continued success at Ford Credit as some of the reasons for the company’s dramatic turnaround. It was the sixth consecutive quarterly profit for the only U.S. carmaker who avoided a bankruptcy filing last year. Ford’s previous best third-quarter earnings were $1.1 billion in 1997.
ArcelorMittal, the world’s largest steelmaker, said net profit for the three months ended September 30 was $1.35 billion compared with $910 million for the same period a year earlier. Despite a 48% increase in profits, the Luxembourg-based company cautioned that the remainder of 2010 will likely be difficult, and the firm forecasted lower prices and weak demand.
Procter & Gamble reported that its fiscal first-quarter earnings declined 6.8%, to $3.08 billion from $3.31 billion a year earlier, as higher commodity costs negatively impacted margins. Still, the latest profit figures for the world’s largest consumer product company exceeded some analysts’ estimates.
Global economic news
U.K.’s economy expands in third quarter
Britain’s economy grew at a faster pace than projected during the third quarter, according to a preliminary estimate from the Office for National Statistics. Gross domestic product increased 0.8% between July and September from the second quarter. Most economists had projected growth of only 0.4% for the quarter, following the previous quarter’s 1.2% growth rate. After the better-than-expected GDP figures were released, Standard & Poor’s raised Britain’s credit rating to stable from negative.
Bank of Japan revises growth forecast downward, holds interest rate steady
Japan’s central bank said in its October outlook report that the country’s economy will grow 2.1% in the year through March 2011 and 1.8% the following year. In July the bank had forecast growth of 2.6% and 1.9%, respectively. The bank, in a statement addressing its moderated forecast, cited declining demand in overseas markets such as the United States and China, the approaching end of government stimulus measures, and the strongly performing yen, which has risen to near historic levels against the dollar. In a separate move, the Bank of Japan voted to keep its key interest rate untouched at 0% to 0.1%.
German consumer confidence unchanged
GfK AG, the Nuremberg-based market research firm, said that its consumer sentiment index will remain at 4.9 in November, its highest level since May 2008. The figure is based on a survey of nearly 2,000 people. German unemployment declined for a fifteenth-straight month in October.
Switzerland consumer index falls to lowest level in six months
Switzerland’s economic recovery may be stalling, at least according to one consumer indicator. UBS AG’s index of consumption dropped to 1.7 in September from 1.95 in August. The latest figure is the lowest index reading since March. The consumer indicator is based on new car sales, retail sales, overnight hotel stays within the country by Swiss residents, consumer confidence, and UBS credit card transactions.
U.S. economic news
Fed may take more “measured approach” with additional economic stimulus
The U.S. Federal Reserve Board’s long awaited quantitative easing policy will most likely be announced following its next policy meeting on November 3. The Wall Street Journal noted this week that the Fed is likely to buy “a few hundred billion” dollars in U.S. Treasury bonds over a period of “several months” to pressure interest rates and stimulate the economy. This amount is well below the $500 billion to $2 trillion figures that have been projected by some analysts and industry experts.
Jobless claims drop to three-month low
The U.S. Department of Labor reported this week that initial unemployment claims unexpectedly fell by 21,000 to 434,000 in the week ended October 23. This was the second weekly drop in the number of new unemployment applicants in the past two weeks. Some economists believe that the latest figures could be an indication that the job market is finally stabilizing.
New home sales climb in September
The U.S. Department of Commerce said that the number of new home sales in September grew 6.6% from August to a seasonally adjusted annual level of 307,000 units. The jump in sales is potentially good news for the battered housing market, which saw sales throughout most of the summer that were the slowest on record since 1963.
Consumer confidence edges up
According to several leading economists, concerns about the job market appear to be keeping U.S. consumer sentiment largely in check. The Conference Board’s Consumer Confidence Index increased only slightly to 50.2 in October from a revised 48.6 in September. September’s reading was the lowest since February and down sharply from 53.2 in August. A reading of 90 indicates a healthy economy.
U.S. and global corporate news
Exxon Mobil, the largest U.S. oil company by market value, reported third-quarter earnings of $7.35 billion, up from $4.73 billion a year earlier. Strong refining margins, higher commodity prices, and a 20% jump in oil production all contributed to this 55% jump in net income, surpassing analyst projections.
Ford Motor posted record third-quarter earnings gains of 70%, with net income rising to $1.7 billion from $997 million a year ago. The automaker cited a strong product line, momentum in North America, and continued success at Ford Credit as some of the reasons for the company’s dramatic turnaround. It was the sixth consecutive quarterly profit for the only U.S. carmaker who avoided a bankruptcy filing last year. Ford’s previous best third-quarter earnings were $1.1 billion in 1997.
ArcelorMittal, the world’s largest steelmaker, said net profit for the three months ended September 30 was $1.35 billion compared with $910 million for the same period a year earlier. Despite a 48% increase in profits, the Luxembourg-based company cautioned that the remainder of 2010 will likely be difficult, and the firm forecasted lower prices and weak demand.
Procter & Gamble reported that its fiscal first-quarter earnings declined 6.8%, to $3.08 billion from $3.31 billion a year earlier, as higher commodity costs negatively impacted margins. Still, the latest profit figures for the world’s largest consumer product company exceeded some analysts’ estimates.
Global economic news
U.K.’s economy expands in third quarter
Britain’s economy grew at a faster pace than projected during the third quarter, according to a preliminary estimate from the Office for National Statistics. Gross domestic product increased 0.8% between July and September from the second quarter. Most economists had projected growth of only 0.4% for the quarter, following the previous quarter’s 1.2% growth rate. After the better-than-expected GDP figures were released, Standard & Poor’s raised Britain’s credit rating to stable from negative.
Bank of Japan revises growth forecast downward, holds interest rate steady
Japan’s central bank said in its October outlook report that the country’s economy will grow 2.1% in the year through March 2011 and 1.8% the following year. In July the bank had forecast growth of 2.6% and 1.9%, respectively. The bank, in a statement addressing its moderated forecast, cited declining demand in overseas markets such as the United States and China, the approaching end of government stimulus measures, and the strongly performing yen, which has risen to near historic levels against the dollar. In a separate move, the Bank of Japan voted to keep its key interest rate untouched at 0% to 0.1%.
German consumer confidence unchanged
GfK AG, the Nuremberg-based market research firm, said that its consumer sentiment index will remain at 4.9 in November, its highest level since May 2008. The figure is based on a survey of nearly 2,000 people. German unemployment declined for a fifteenth-straight month in October.
Switzerland consumer index falls to lowest level in six months
Switzerland’s economic recovery may be stalling, at least according to one consumer indicator. UBS AG’s index of consumption dropped to 1.7 in September from 1.95 in August. The latest figure is the lowest index reading since March. The consumer indicator is based on new car sales, retail sales, overnight hotel stays within the country by Swiss residents, consumer confidence, and UBS credit card transactions.
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