Stocks declined this week as ongoing concerns about the eurozone debt crisis forced investors to the sidelines. The cost of insuring against a default on European sovereign debt approached record levels amid the ongoing search for an exit strategy that is acceptable to all. Investor disappointment that the U.S. Federal Reserve Board refrained from taking new action to bolster U.S. growth further pressured markets.
U.S. and global economic news
Euro drops to lowest level in nearly a year
The euro dropped to its lowest level against the dollar in nearly a year amid concerns about the eurozone economy. Doubts about efforts to contain the debt crisis continued to unsettle investors this week as the region's leaders debated solutions to the financial woes. Rates that banks charge each other for short-term borrowing in dollars hit their highest level since July 2009, and yields on Italian bonds jumped above 7%, a level that makes it difficult for Italy to borrow.
Fed maintains easy monetary policy
The Fed this week reaffirmed its belief that current economic conditions will likely warrant exceptionally low interest rates through at least mid-2013. This week's stable inflation numbers gave the central bank further leeway to keep a lid on rates. U.S. consumer prices were unchanged in November as a drop in energy costs offset a slight rise in food prices. Other news showed some year-end strengthening of the economy. Jobless claims fell unexpectedly last week to their lowest level in three years, and manufacturing in the New York region expanded in December to the highest level in seven months.
Indonesia regains investment-grade rating
After 14 years, Indonesia regained an investment-grade rating for its sovereign debt from Fitch Ratings. The country, Southeast Asia's largest economy, had its long-term foreign and local currency debt raised to BBB- from BB+. It had lost its investment-grade rating in December 1997 during the Asian financial crisis. Fitch said that the upgrade reflects the country's strong and resilient economic growth, low and declining public debt ratios, strengthened external liquidity, and prudent overall macro policy framework.
U.S. and global corporate news
Two European banks take emergency measures to address deepening crisis
Crédit Agricole, France's third largest bank, said it will exit 21 of 53 countries in which it operates in an effort to shore up its finances. It also announced that it will sell its private equity business to investment fund Coller Capital as part of its plan to boost capital ratios. Commerzbank, Germany's second largest bank by assets, is in negotiations to transfer suspect assets to a government-owned "bad bank." Transferring its bad assets to this government bank will allow Commerzbank to shore up its balance sheets, while avoiding the appearance of a taxpayer bailout.
RIM's stock falls to seven-year lows
Blackberry maker Research in Motion's stock fell to a seven-year low after it announced its fiscal third-quarter earnings fell 71% on charges related to the troubled launch of a tablet competitor to Apple's iPad. The company further disappointed investors with news that its long-awaited product revamp will be delayed until later in 2012.
Zynga raises $1 billion in IPO
Zynga, the largest maker of games for Facebook, raised $1 billion in its initial public offering of 100 million shares of common stock at $10 per share. The offering is the biggest by a U.S. Internet company since Google raised $1.9 billion in its 2004 IPO. The stock will trade under the symbol ZNGA.
Morgan Stanley to cut 1,600 jobs
Morgan Stanley announced plans to cut 1,600 jobs, or 2.6% of its workforce. The layoffs come as Wall Street profits are hit by volatile markets and customer hesitancy toward investing. The cuts are the largest for the company since late 2008 and early 2009, when it laid off more than 2,500 workers in the midst of the financial crisis.
Sunday, December 18, 2011
Friday, December 9, 2011
U.S. economic news for the week ended December 9, 2011
Amid mounting pressure from financial markets and policymakers to come up with a workable plan to contain the eurozone debt crisis, the European Union's all-night effort to save the eurozone from debt contagion met with mixed reviews. Throughout the week investors bid stocks higher and lower as efforts to shore up the region's financial woes were met with news of ratings agency downgrades of eurozone countries and many if its banks. By Friday, investors were left to scrutinize the EU agreement that calls for a tightening of fiscal coordination and to examine the details of an intergovernmental treaty that is still in the works.
U.S. and global economic news
EU leaders seal blueprint for closer fiscal union
After a marathon meeting this week, European leaders agreed to cap the European Stability Mechanism at 500 billion and that EU nations would provide up to 200 billion in loans to the International Monetary Fund to increase its funding ability. In spite of opposition from the United Kingdom, the 17 countries of the eurozone also agreed to run only minimal budget deficits in the future and allow the European Court of Justice the right to strike down national laws that do not properly enforce such discipline.
S&P puts 15 eurozone nations on negative credit watch
Standard & Poor's Ratings Service put the long-term debt ratings of 15 eurozone nations on negative watch. That warning includes Germany and five AAA members and comes as turmoil deepens in the currency bloc. The warning typically means that there is a 50% chance of a downgrade within 90 days. S&P also said it placed the long-term credit rating of the European Financial Stability Facility on credit watch negative. The move puts the bailout fund's rating on review for a possible downgrade. In another follow-up to its warning on Monday, S&P said some of the eurozone's largest banks, such as BNP Paribas and Deutsche Bank, could have their ratings cut, following a potential downgrade of eurozone countries.
Central banks weigh rate cuts
Central bankers around the world continue to weigh faltering growth prospects against weaker currencies as the sovereign debt crisis threatens to spill over from Greece. The European Central Bank cut interest rates for the second month in a row, lowering the benchmark interest rate by a quarter of a percentage point to 1% to match a record low. Meanwhile, the Bank of England kept the size of its asset-purchase program unchanged at 275 billion and left its key interest rate at 0.5%. The Reserve Bank of Australia cut its rate for the second month in a row as Europe's fiscal crisis threatened to slow its commodity exports, which would in turn send its currency lower. The bank lowered the rate by a quarter of a basis point to 4.25%. Serbia's central bank unexpectedly lowered its rate for the sixth time since June on concerns the European debt crisis will damp exports demand and slow growth. South Korea, New Zealand, and Indonesia left rates unchanged.
German industrial production rises; Italy and United Kingdom see declines
Germany's economy showed signs of life in October as industrial production rose more than expected after falling for the previous two months. Industrial production numbers from Italy showed a decline at the fastest rate in two years. U.K. factories decreased their output in October to the weakest annual rate since January 2010.
U.S. trade deficit narrows
In October, the U.S. trade deficit narrowed to its lowest level for the year. The gap shrank 1.6% as imports declined to a level not seen since April. That drop resulted almost entirely from a decrease in demand for oil. Imports of capital goods rose an indication that consumer spending is still keeping the economy afloat. Exports to China and South and Central America reached records, a sign that U.S. companies are benefiting from rising demand for their products in developing nations.
Japan's machinery orders fall
Japan's machinery orders unexpectedly fell for a second month in October, a signal that a strong yen and global slowing are prompting companies to postpone investment. Orders, an indicator of capital spending, fell 6.9% from a month earlier.
U.S. and global corporate news
Moody's cuts ratings of big French banks
Moody's Investors Service cut the credit ratings of BNP Paribas, Socit Gnrale, and Crdit Agricole amid funding constraints and deteriorating economic conditions. Moody's cut the long-term ratings for BNP and Crdit Agricole by one level to Aa3, the fourth-highest investment grade. Socit Gnrale's rating was cut to A1, the fifth highest. Moody's also cut the standalone assessments of financial strength of the three banks.
European banks face 114.7 billion shortfall
The European Banking Authority said European banks have a capital shortfall of 114.7 billion. The new figure is 8 billion more than the EBA estimated in October and published in the EBA's bank recapitalization plans that are among measures agreed to by the European Council in October in response to the European debt crisis.
Citigroup to cut 4,500 jobs
Citigroup announced that it will cut about 4,500 jobs over the next few quarters as volatile financial markets and new regulations hit profits. The company will take a $400 million charge in the fourth quarter to cover severance and other expenses.
Ford Motor declares first dividend since 2006
Ford Motor declared a $0.05 quarterly dividend, its first payout to shareholders since September 2006. The announcement came as part of Ford's news that it earned $1.65 billion in the three months ended in September. This marked the company's tenth-consecutive profitable quarter.
U.S. and global economic news
EU leaders seal blueprint for closer fiscal union
After a marathon meeting this week, European leaders agreed to cap the European Stability Mechanism at 500 billion and that EU nations would provide up to 200 billion in loans to the International Monetary Fund to increase its funding ability. In spite of opposition from the United Kingdom, the 17 countries of the eurozone also agreed to run only minimal budget deficits in the future and allow the European Court of Justice the right to strike down national laws that do not properly enforce such discipline.
S&P puts 15 eurozone nations on negative credit watch
Standard & Poor's Ratings Service put the long-term debt ratings of 15 eurozone nations on negative watch. That warning includes Germany and five AAA members and comes as turmoil deepens in the currency bloc. The warning typically means that there is a 50% chance of a downgrade within 90 days. S&P also said it placed the long-term credit rating of the European Financial Stability Facility on credit watch negative. The move puts the bailout fund's rating on review for a possible downgrade. In another follow-up to its warning on Monday, S&P said some of the eurozone's largest banks, such as BNP Paribas and Deutsche Bank, could have their ratings cut, following a potential downgrade of eurozone countries.
Central banks weigh rate cuts
Central bankers around the world continue to weigh faltering growth prospects against weaker currencies as the sovereign debt crisis threatens to spill over from Greece. The European Central Bank cut interest rates for the second month in a row, lowering the benchmark interest rate by a quarter of a percentage point to 1% to match a record low. Meanwhile, the Bank of England kept the size of its asset-purchase program unchanged at 275 billion and left its key interest rate at 0.5%. The Reserve Bank of Australia cut its rate for the second month in a row as Europe's fiscal crisis threatened to slow its commodity exports, which would in turn send its currency lower. The bank lowered the rate by a quarter of a basis point to 4.25%. Serbia's central bank unexpectedly lowered its rate for the sixth time since June on concerns the European debt crisis will damp exports demand and slow growth. South Korea, New Zealand, and Indonesia left rates unchanged.
German industrial production rises; Italy and United Kingdom see declines
Germany's economy showed signs of life in October as industrial production rose more than expected after falling for the previous two months. Industrial production numbers from Italy showed a decline at the fastest rate in two years. U.K. factories decreased their output in October to the weakest annual rate since January 2010.
U.S. trade deficit narrows
In October, the U.S. trade deficit narrowed to its lowest level for the year. The gap shrank 1.6% as imports declined to a level not seen since April. That drop resulted almost entirely from a decrease in demand for oil. Imports of capital goods rose an indication that consumer spending is still keeping the economy afloat. Exports to China and South and Central America reached records, a sign that U.S. companies are benefiting from rising demand for their products in developing nations.
Japan's machinery orders fall
Japan's machinery orders unexpectedly fell for a second month in October, a signal that a strong yen and global slowing are prompting companies to postpone investment. Orders, an indicator of capital spending, fell 6.9% from a month earlier.
U.S. and global corporate news
Moody's cuts ratings of big French banks
Moody's Investors Service cut the credit ratings of BNP Paribas, Socit Gnrale, and Crdit Agricole amid funding constraints and deteriorating economic conditions. Moody's cut the long-term ratings for BNP and Crdit Agricole by one level to Aa3, the fourth-highest investment grade. Socit Gnrale's rating was cut to A1, the fifth highest. Moody's also cut the standalone assessments of financial strength of the three banks.
European banks face 114.7 billion shortfall
The European Banking Authority said European banks have a capital shortfall of 114.7 billion. The new figure is 8 billion more than the EBA estimated in October and published in the EBA's bank recapitalization plans that are among measures agreed to by the European Council in October in response to the European debt crisis.
Citigroup to cut 4,500 jobs
Citigroup announced that it will cut about 4,500 jobs over the next few quarters as volatile financial markets and new regulations hit profits. The company will take a $400 million charge in the fourth quarter to cover severance and other expenses.
Ford Motor declares first dividend since 2006
Ford Motor declared a $0.05 quarterly dividend, its first payout to shareholders since September 2006. The announcement came as part of Ford's news that it earned $1.65 billion in the three months ended in September. This marked the company's tenth-consecutive profitable quarter.
Friday, December 2, 2011
U.S. economic news for the week ended December 2, 2011
An upbeat week for markets stood in sharp contrast to the previous week’s large financial market declines. The key was a decisive move by central banks to allow for less expensive overseas borrowing of U.S. dollars, particularly helpful to the European Central Bank’s effort to avert an immediate worsening of the eurozone debt crisis. Other positive signs include a drop in the U.S. unemployment rate to 8.6%, accompanied by a healthy increase in the number of U.S. jobs, and a sharp rise in U.S. consumer confidence. Strong early holiday-season sales among U.S. retailers are also encouraging.
For the week, major stock indices around the world posted gains of 5% or more, highlighting once again the abnormally volatile period for global markets. U.S. Treasury yields rose in response to the unexpected drop in the U.S. unemployment rate, while the euro rallied earlier in the week in reaction to the improved prospects for European liquidity.
U.S. and global economic news
Global central bank action sparks market rally
Central banks including the U.S. Federal Reserve, the Bank of Canada, the European Central Bank (ECB), the Bank of England, the Bank of Japan, and the Swiss National Bank on Wednesday announced a plan to cut in half the cost of borrowing dollars from the Fed. The move is designed to assure financial markets that the ECB will have the money it needs to lend to struggling eurozone banks and therefore avoid a deepening of the debt crisis. However, the measure is seen as only a temporary way to alleviate market concerns, and doesn’t directly address the deep financial troubles facing European governments.
Belgian credit rating cut
Belgium’s government credit rating was cut by Standard & Poor’s by one notch to AA. The country’s borrowing costs rose to their highest levels in 11 years after it agreed to buy Dexia’s Belgian bank unit and guarantee part of its liabilities for the next decade.
Unemployment rate down; jobs numbers up
The U.S. labor market strengthened in November, as a rise of 120,000 jobs in the nonfarm payroll total was accompanied by a drop in the unemployment rate to 8.6% from 9.0% in October. Also positive are upward revisions of the October and September payroll numbers. October’s figure rose to a gain of 100,000 from a previously reported 80,000, and September was revised to a 210,000 gain from 158,000, as more reports from small businesses came in.
U.S. consumer confidence rises sharply
Consumer confidence rose sharply in November, according to three domestic U.S. indices. The Conference Board’s index increased to 56 from 40.9 in October, its biggest jump since April 2003. The Thomson Reuters/University of Michigan final index of consumer sentiment rose to 64.1 from 60.9, and the Bloomberg Consumer Comfort Index’s monthly expectations gauge also rose.
Weekly jobless claims rise above 400,000
Initial claims for unemployment benefits among U.S. workers rose unexpectedly last week, climbing by 6,000 to a seasonally adjusted 402,000. Economists surveyed by Dow Jones Newswires had expected a drop of 3,000. This was the first week since October that new claims for jobless benefits were above 400,000. The four-week average for new claims increased by 500 to 395,750.
House prices fall again
The S&P/Case-Shiller index of property values in 20 cities dropped 3.6% in September from a year earlier while the figure for the 10-city index was 3.3% lower than September 2010, demonstrating that the housing market has yet to find its bottom.
Fitch cuts U.S. credit outlook to negative
Fitch Ratings downgraded the outlook for U.S. government debt to negative from stable following the failure of the congressional super committee on deficit reduction to come to an agreement by the end of November after being given a mandate to cut the federal budget deficit by $1.2 trillion over 10 years.
Manufacturing weakens in eurozone and Asia
Separate reports from the eurozone and Asian countries point to the same thing –– a contracting manufacturing sector. The eurozone manufacturing purchasing managers’ index (PMI), a monthly survey by Markit, fell to its lowest point in 28 months, 46.4 in November, from 47.1 in October. Anything below 50 denotes contraction. China, South Korea, Taiwan, and Australia also reported shrinking manufacturing activity. India’s PMI was barely positive at 51, down from 52 the previous month.
China shifts stance to monetary easing
In response to signs that its economy is slowing, the Chinese government unexpectedly changed direction with its monetary policy, reversing a trend toward monetary tightening with the announcement that it would allow commercial banks to keep a smaller percentage of their profits as reserves at the central bank. The reserve requirement ratio is now 21% for large banks and 19% for smaller banks.
U.S. and global corporate news
Moody’s cuts loom for European banks
Moody’s Investors Service has placed the subordinated debt ratings of 87 banks in 15 European nations, including France, Italy, and Spain, on review for a downgrade. The move reflects the potential impact of the removal of government support to all subordinated, junior-subordinated, and Tier 3 debt ratings of banks in countries where subordinated debt assumes a level of government support.
American Airlines’ parent files for bankruptcy
AMR, the parent of American Airlines, filed for bankruptcy protection despite having more than $4 billion in cash. American was the only U.S. legacy airline that had not yet sought bankruptcy protection. Over the past decade, AMR has lost more than $10 billion, struggling to compete against rivals United Airlines and Delta Air Lines, who had benefited from court protected restructurings and mergers.
Retailers boast surge in early holiday sales
November was a good month for many major retailers, who started the critically important holiday sales season with better figures than last year’s. Close to two dozen retailers tracked by Thomson Reuters were on target for a 3.1% growth in sales at stores open for more than a year. This included Macy’s (up 4.8% in same-store sales), Saks registered a 9.3% sales rise, and Costco had 7% sales growth. However, sales at Kohl’s fell 6.2%, Target’s same-store sales grew by 1.8%, and J.C. Penney had a 2% decline.
November a hot month for U.S. car sales
Domestic and foreign automakers benefited from an outpouring of pent-up consumer demand in November, as sales of automobiles in the United States were boosted by lower gas prices and a wider availability of Japanese vehicles. Among U.S. manufacturers, Chrysler’s domestic sales rose 45%, Ford Motor’s sales were up 13%, General Motors had a 7% increase in sales.
Foreign automakers generally had a strong month in U.S. sales, with increases by Kia Motor (up 39%), Hyundai Motor (up 22%), Mazda Motor (up 20%), Nissan Motor (up 19%), and Toyota Motor (up 6.7%). Not faring as well were Honda Motor (sales off by 6.7%), Mitsubishi Motors (down 13%) and Suzuki Motor (down 22%).
American Eagle profit soars
American Eagle Outfitters posted a 59% increase in its fiscal third-quarter earnings versus a charge it took a year ago and reported a strong Black Friday shopping weekend. The company started 2011 with weak sales, but results have improved as the year has progressed.
Canadian banks post strong results
Four of Canada’s large chartered banks posted strong quarterly results in sharp contrast to beleaguered European banks. Royal Bank of Canada’s fiscal fourth-quarter earnings rose 43%, Toronto-Dominion Bank’s net income rose 58%, Canadian Imperial Bank of Commerce had a 59% rise in quarterly profit, and Bank of Nova Scotia’s fourth-quarter earnings rose by 11%. Canada’s banks generally benefited from minimal exposure to highly indebted European countries.
For the week, major stock indices around the world posted gains of 5% or more, highlighting once again the abnormally volatile period for global markets. U.S. Treasury yields rose in response to the unexpected drop in the U.S. unemployment rate, while the euro rallied earlier in the week in reaction to the improved prospects for European liquidity.
U.S. and global economic news
Global central bank action sparks market rally
Central banks including the U.S. Federal Reserve, the Bank of Canada, the European Central Bank (ECB), the Bank of England, the Bank of Japan, and the Swiss National Bank on Wednesday announced a plan to cut in half the cost of borrowing dollars from the Fed. The move is designed to assure financial markets that the ECB will have the money it needs to lend to struggling eurozone banks and therefore avoid a deepening of the debt crisis. However, the measure is seen as only a temporary way to alleviate market concerns, and doesn’t directly address the deep financial troubles facing European governments.
Belgian credit rating cut
Belgium’s government credit rating was cut by Standard & Poor’s by one notch to AA. The country’s borrowing costs rose to their highest levels in 11 years after it agreed to buy Dexia’s Belgian bank unit and guarantee part of its liabilities for the next decade.
Unemployment rate down; jobs numbers up
The U.S. labor market strengthened in November, as a rise of 120,000 jobs in the nonfarm payroll total was accompanied by a drop in the unemployment rate to 8.6% from 9.0% in October. Also positive are upward revisions of the October and September payroll numbers. October’s figure rose to a gain of 100,000 from a previously reported 80,000, and September was revised to a 210,000 gain from 158,000, as more reports from small businesses came in.
U.S. consumer confidence rises sharply
Consumer confidence rose sharply in November, according to three domestic U.S. indices. The Conference Board’s index increased to 56 from 40.9 in October, its biggest jump since April 2003. The Thomson Reuters/University of Michigan final index of consumer sentiment rose to 64.1 from 60.9, and the Bloomberg Consumer Comfort Index’s monthly expectations gauge also rose.
Weekly jobless claims rise above 400,000
Initial claims for unemployment benefits among U.S. workers rose unexpectedly last week, climbing by 6,000 to a seasonally adjusted 402,000. Economists surveyed by Dow Jones Newswires had expected a drop of 3,000. This was the first week since October that new claims for jobless benefits were above 400,000. The four-week average for new claims increased by 500 to 395,750.
House prices fall again
The S&P/Case-Shiller index of property values in 20 cities dropped 3.6% in September from a year earlier while the figure for the 10-city index was 3.3% lower than September 2010, demonstrating that the housing market has yet to find its bottom.
Fitch cuts U.S. credit outlook to negative
Fitch Ratings downgraded the outlook for U.S. government debt to negative from stable following the failure of the congressional super committee on deficit reduction to come to an agreement by the end of November after being given a mandate to cut the federal budget deficit by $1.2 trillion over 10 years.
Manufacturing weakens in eurozone and Asia
Separate reports from the eurozone and Asian countries point to the same thing –– a contracting manufacturing sector. The eurozone manufacturing purchasing managers’ index (PMI), a monthly survey by Markit, fell to its lowest point in 28 months, 46.4 in November, from 47.1 in October. Anything below 50 denotes contraction. China, South Korea, Taiwan, and Australia also reported shrinking manufacturing activity. India’s PMI was barely positive at 51, down from 52 the previous month.
China shifts stance to monetary easing
In response to signs that its economy is slowing, the Chinese government unexpectedly changed direction with its monetary policy, reversing a trend toward monetary tightening with the announcement that it would allow commercial banks to keep a smaller percentage of their profits as reserves at the central bank. The reserve requirement ratio is now 21% for large banks and 19% for smaller banks.
U.S. and global corporate news
Moody’s cuts loom for European banks
Moody’s Investors Service has placed the subordinated debt ratings of 87 banks in 15 European nations, including France, Italy, and Spain, on review for a downgrade. The move reflects the potential impact of the removal of government support to all subordinated, junior-subordinated, and Tier 3 debt ratings of banks in countries where subordinated debt assumes a level of government support.
American Airlines’ parent files for bankruptcy
AMR, the parent of American Airlines, filed for bankruptcy protection despite having more than $4 billion in cash. American was the only U.S. legacy airline that had not yet sought bankruptcy protection. Over the past decade, AMR has lost more than $10 billion, struggling to compete against rivals United Airlines and Delta Air Lines, who had benefited from court protected restructurings and mergers.
Retailers boast surge in early holiday sales
November was a good month for many major retailers, who started the critically important holiday sales season with better figures than last year’s. Close to two dozen retailers tracked by Thomson Reuters were on target for a 3.1% growth in sales at stores open for more than a year. This included Macy’s (up 4.8% in same-store sales), Saks registered a 9.3% sales rise, and Costco had 7% sales growth. However, sales at Kohl’s fell 6.2%, Target’s same-store sales grew by 1.8%, and J.C. Penney had a 2% decline.
November a hot month for U.S. car sales
Domestic and foreign automakers benefited from an outpouring of pent-up consumer demand in November, as sales of automobiles in the United States were boosted by lower gas prices and a wider availability of Japanese vehicles. Among U.S. manufacturers, Chrysler’s domestic sales rose 45%, Ford Motor’s sales were up 13%, General Motors had a 7% increase in sales.
Foreign automakers generally had a strong month in U.S. sales, with increases by Kia Motor (up 39%), Hyundai Motor (up 22%), Mazda Motor (up 20%), Nissan Motor (up 19%), and Toyota Motor (up 6.7%). Not faring as well were Honda Motor (sales off by 6.7%), Mitsubishi Motors (down 13%) and Suzuki Motor (down 22%).
American Eagle profit soars
American Eagle Outfitters posted a 59% increase in its fiscal third-quarter earnings versus a charge it took a year ago and reported a strong Black Friday shopping weekend. The company started 2011 with weak sales, but results have improved as the year has progressed.
Canadian banks post strong results
Four of Canada’s large chartered banks posted strong quarterly results in sharp contrast to beleaguered European banks. Royal Bank of Canada’s fiscal fourth-quarter earnings rose 43%, Toronto-Dominion Bank’s net income rose 58%, Canadian Imperial Bank of Commerce had a 59% rise in quarterly profit, and Bank of Nova Scotia’s fourth-quarter earnings rose by 11%. Canada’s banks generally benefited from minimal exposure to highly indebted European countries.
Friday, November 18, 2011
U.S. economic news for the week ended November 18, 2011
Stocks fell sharply this week as fears increased that the eurozone crisis was spreading from the periphery to top-rated nations such as Austria, the Netherlands, Finland, and France. Yields on French, Italian, and Spanish bonds soared, with those in Spain reaching euro-era records. The sharp rise in European borrowing costs has increased worries that the debt crisis could spread to larger, heavily indebted countries.
As the crisis heated up, so too did the disagreement between France and Germany over the role that the European Central Bank (ECB) should play in solving it. Investors have shrugged off the bank's limited bond buying, and there has been increasing pressure on the ECB to take drastic action to stabilize European bond markets. Germany rejected France's call to deploy the ECB to rescue indebted nations, and ECB President Mario Draghi pushed back against the calls from politicians and investors and expressed impatience with leaders' failure to act to bolster the region's rescue fund. He noted that the ECB would lose credibility if it departed from its primary role of keeping prices stable.
U.S. and global economic news
Monti takes reins from Berlusconi
On Wednesday, Mario Monti, a 68-year-old economics professor, took over as prime minister of Italy. He now faces a final confidence vote in his new government after vowing to attack the euro area's second-largest debt burden and spur growth in the region's third-largest economy.
Papademos wins approval for finalizing next year's budget
Greek Prime Minister Lucas Papademos won approval for finalizing next year's budget, which is designed to regain the confidence of creditors and secure resumption of international financing. The budget forecast that Greece's debt as a proportion of gross domestic product will fall to 145.5% in 2012 from 161.7% this year.
U.S. data prompt upward growth revisions
Solid U.S. economic data have economists upping their forecasts for fourth-quarter growth. JPMorgan Chase raised its growth forecast to 3% in the fourth quarter from its previous prediction of 2.5%. Solid data on consumption, business spending, and residential investment all point to higher GDP growth in the fourth quarter. This week, retail sales seemed to underline that positive movement. Sales rose 0.5% in October, the fifth consecutive monthly increase. Adding to the positive sentiment, initial jobless claims fell to 388,000 in the week ended November 12 from 393,000 the previous week. Industrial production rose 0.7% in October, more than expected, and confidence among U.S. builders climbed in November.
Eurozone economy grows modestly
The eurozone economy grew modestly in the third quarter, expanding by 0.2%, the same pace as that of the second quarter, according to Eurostat. Economists have warned, however, that the escalating eurozone crisis and fiscal austerity measures across the region have yet to feed into growth. Meanwhile, Bank of England Governor Mervyn King said Britain faces a “markedly weaker” outlook for the economy as Europe’s crisis threatens global growth.
U.S. and global corporate news
Fitch warns U.S. banks of eurozone risk
Fitch Ratings told U.S. banks that further contagion from Europe's debt crisis could pose a risk to them. Stocks extended losses after Fitch said that while U.S. lenders have “manageable direct exposures” to Greece, Ireland, Italy, Portugal, and Spain, further turmoil in those markets poses a “serious risk.”
Banks slash spending, jobs
UBS said it will slash its investment banking unit assets by one-half and shed flagging businesses as it focuses on its private banks. Citigroup is planning to eliminate 900 jobs in its securities and banking division; that is about 5% of the unit's worldwide staff. Citigroup is drawing up plans to eliminate about 3,000 jobs, or 1% of its global work force. This week BNP Paribas also announced plans to cut about 1,400 jobs, less than 1% of its work force.
Dell reports profits; Sears notes a wider-than-expected loss
Dell reported that its third-quarter profits jumped nearly 9% but that its revenue was flat. The computer maker issued a cautious outlook because of the weak economy and component shortages caused by flooding in Thailand. Sears Holdings reported a wider-than-expected third-quarter loss; its revenue fell short of expectations and margins narrowed.
Angie's List goes public
Consumer review website Angie's List went public with its stock pricing at $13 per share. It sold 8.79 million shares at the high.
As the crisis heated up, so too did the disagreement between France and Germany over the role that the European Central Bank (ECB) should play in solving it. Investors have shrugged off the bank's limited bond buying, and there has been increasing pressure on the ECB to take drastic action to stabilize European bond markets. Germany rejected France's call to deploy the ECB to rescue indebted nations, and ECB President Mario Draghi pushed back against the calls from politicians and investors and expressed impatience with leaders' failure to act to bolster the region's rescue fund. He noted that the ECB would lose credibility if it departed from its primary role of keeping prices stable.
U.S. and global economic news
Monti takes reins from Berlusconi
On Wednesday, Mario Monti, a 68-year-old economics professor, took over as prime minister of Italy. He now faces a final confidence vote in his new government after vowing to attack the euro area's second-largest debt burden and spur growth in the region's third-largest economy.
Papademos wins approval for finalizing next year's budget
Greek Prime Minister Lucas Papademos won approval for finalizing next year's budget, which is designed to regain the confidence of creditors and secure resumption of international financing. The budget forecast that Greece's debt as a proportion of gross domestic product will fall to 145.5% in 2012 from 161.7% this year.
U.S. data prompt upward growth revisions
Solid U.S. economic data have economists upping their forecasts for fourth-quarter growth. JPMorgan Chase raised its growth forecast to 3% in the fourth quarter from its previous prediction of 2.5%. Solid data on consumption, business spending, and residential investment all point to higher GDP growth in the fourth quarter. This week, retail sales seemed to underline that positive movement. Sales rose 0.5% in October, the fifth consecutive monthly increase. Adding to the positive sentiment, initial jobless claims fell to 388,000 in the week ended November 12 from 393,000 the previous week. Industrial production rose 0.7% in October, more than expected, and confidence among U.S. builders climbed in November.
Eurozone economy grows modestly
The eurozone economy grew modestly in the third quarter, expanding by 0.2%, the same pace as that of the second quarter, according to Eurostat. Economists have warned, however, that the escalating eurozone crisis and fiscal austerity measures across the region have yet to feed into growth. Meanwhile, Bank of England Governor Mervyn King said Britain faces a “markedly weaker” outlook for the economy as Europe’s crisis threatens global growth.
U.S. and global corporate news
Fitch warns U.S. banks of eurozone risk
Fitch Ratings told U.S. banks that further contagion from Europe's debt crisis could pose a risk to them. Stocks extended losses after Fitch said that while U.S. lenders have “manageable direct exposures” to Greece, Ireland, Italy, Portugal, and Spain, further turmoil in those markets poses a “serious risk.”
Banks slash spending, jobs
UBS said it will slash its investment banking unit assets by one-half and shed flagging businesses as it focuses on its private banks. Citigroup is planning to eliminate 900 jobs in its securities and banking division; that is about 5% of the unit's worldwide staff. Citigroup is drawing up plans to eliminate about 3,000 jobs, or 1% of its global work force. This week BNP Paribas also announced plans to cut about 1,400 jobs, less than 1% of its work force.
Dell reports profits; Sears notes a wider-than-expected loss
Dell reported that its third-quarter profits jumped nearly 9% but that its revenue was flat. The computer maker issued a cautious outlook because of the weak economy and component shortages caused by flooding in Thailand. Sears Holdings reported a wider-than-expected third-quarter loss; its revenue fell short of expectations and margins narrowed.
Angie's List goes public
Consumer review website Angie's List went public with its stock pricing at $13 per share. It sold 8.79 million shares at the high.
Friday, November 11, 2011
U.S. economic news for the week ended November 11, 2011
Following another week of intense uncertainty, markets breathed a sigh of relief after Italy and Greece showed progress in the formation of new governments. Stocks recouped losses, and bond yields eased from the record levels hit earlier in the week.
U.S. and global economic news
Italy and Greece take steps to change governments
Italy's senate approved a key budget bill, paving the way for Prime Minister Silvio Berlusconi to step down and for a new government, led by former European Union Competition Commissioner Mario Monti, to be formed. Greece, meanwhile, will swear in Lucas Papademos to lead a unity government. That decision ends days of wrangling among political parties over who will lead an interim government after a political crisis forced Prime Minister George Papandreou to step down.
Italy's bond yields retreat after hitting euro-era highs
Italy's 10-year bond yields, which soared to a euro-era high of 7.45% this week, fell after the budget bill's approval. The level above 7% is one that had previously driven Greece, Ireland, and Portugal to seek international bailouts. The bond panic was set off earlier in the week after LCH.Clearnet Group demanded increased deposits for trading Italy's securities. LCH is a clearinghouse that guarantees investors' trades are completed.
EU cuts 2012 growth forecast
The European Union cut its growth forecast for 2012 to 0.6%, sharply down from the 1.9% it made six months ago. The European Commission, which is the EU's executive arm, said it could not rule out the possibility of a deep and prolonged recession.
China's inflation slows
China's inflation slowed significantly in October, potentially opening the door for Beijing to loosen its reins on the economy. Housing prices showed further signs of decline. However, the slowing pace of inflation is also raising concerns about the nation's role as an engine of global growth.
BoE maintains bond purchase targets; keeps rates unchanged
The Bank of England maintained its target for asset purchases. The ceiling for so-called quantitative easing was held at £275 billion. The bank also kept its key interest rate at a record low of 0.5%
U.S. consumer confidence climbs more than expected
Confidence among U.S. consumers rose more than expected in early November, according to the Thomson Reuters/University of Michigan preliminary index of consumer confidence. That index climbed to its highest level since June. In other U.S. news, in September consumers stepped up their borrowing and the trade deficit unexpectedly narrowed on record exports. First-time applications for unemployment benefits fell 10,000 to a seven-month low, and wholesale inventories unexpectedly fell in September for the first time since 2009 as a gain in sales helped keep stockpiles in line with demand.
Bank Indonesia cuts rates
Bank Indonesia surprised markets by cutting its key reference rate by a half a percentage point to 6%, a record low. This is the largest cut for the bank since March 2009. South Korea and Malaysia both left rates unchanged this week.
U.S. and global corporate news
Crédit Agricole's profits fall 65%
Crédit Agricole, France's third-largest bank by market value, reported a 65% drop in third-quarter profits after it was hit by a heavier-than-expected write-down on its Greek government bonds and further losses at its troubled Emporiki Bank of Greece unit. Like BNP Paribas and Société Général, Crédit Agricole has reduced its exposure to government bonds in troubled eurozone countries in recent months.
Toyota's earnings slump 19%
Toyota Motor reported a 19% decline in quarterly profit as the strong yen and production cutbacks hit sales.
Yelp planning IPO
Yelp is set to launch plans for an IPO that could value the online consumer review company at between $1 billion and $2 billion.
Walt Disney's net jumps 30%
Walt Disney reported that its fourth-quarter profits jumped 30%. The profits, which beat estimates, got a boost from strength in Disney's parks and resorts and media network business segments.
U.S. and global economic news
Italy and Greece take steps to change governments
Italy's senate approved a key budget bill, paving the way for Prime Minister Silvio Berlusconi to step down and for a new government, led by former European Union Competition Commissioner Mario Monti, to be formed. Greece, meanwhile, will swear in Lucas Papademos to lead a unity government. That decision ends days of wrangling among political parties over who will lead an interim government after a political crisis forced Prime Minister George Papandreou to step down.
Italy's bond yields retreat after hitting euro-era highs
Italy's 10-year bond yields, which soared to a euro-era high of 7.45% this week, fell after the budget bill's approval. The level above 7% is one that had previously driven Greece, Ireland, and Portugal to seek international bailouts. The bond panic was set off earlier in the week after LCH.Clearnet Group demanded increased deposits for trading Italy's securities. LCH is a clearinghouse that guarantees investors' trades are completed.
EU cuts 2012 growth forecast
The European Union cut its growth forecast for 2012 to 0.6%, sharply down from the 1.9% it made six months ago. The European Commission, which is the EU's executive arm, said it could not rule out the possibility of a deep and prolonged recession.
China's inflation slows
China's inflation slowed significantly in October, potentially opening the door for Beijing to loosen its reins on the economy. Housing prices showed further signs of decline. However, the slowing pace of inflation is also raising concerns about the nation's role as an engine of global growth.
BoE maintains bond purchase targets; keeps rates unchanged
The Bank of England maintained its target for asset purchases. The ceiling for so-called quantitative easing was held at £275 billion. The bank also kept its key interest rate at a record low of 0.5%
U.S. consumer confidence climbs more than expected
Confidence among U.S. consumers rose more than expected in early November, according to the Thomson Reuters/University of Michigan preliminary index of consumer confidence. That index climbed to its highest level since June. In other U.S. news, in September consumers stepped up their borrowing and the trade deficit unexpectedly narrowed on record exports. First-time applications for unemployment benefits fell 10,000 to a seven-month low, and wholesale inventories unexpectedly fell in September for the first time since 2009 as a gain in sales helped keep stockpiles in line with demand.
Bank Indonesia cuts rates
Bank Indonesia surprised markets by cutting its key reference rate by a half a percentage point to 6%, a record low. This is the largest cut for the bank since March 2009. South Korea and Malaysia both left rates unchanged this week.
U.S. and global corporate news
Crédit Agricole's profits fall 65%
Crédit Agricole, France's third-largest bank by market value, reported a 65% drop in third-quarter profits after it was hit by a heavier-than-expected write-down on its Greek government bonds and further losses at its troubled Emporiki Bank of Greece unit. Like BNP Paribas and Société Général, Crédit Agricole has reduced its exposure to government bonds in troubled eurozone countries in recent months.
Toyota's earnings slump 19%
Toyota Motor reported a 19% decline in quarterly profit as the strong yen and production cutbacks hit sales.
Yelp planning IPO
Yelp is set to launch plans for an IPO that could value the online consumer review company at between $1 billion and $2 billion.
Walt Disney's net jumps 30%
Walt Disney reported that its fourth-quarter profits jumped 30%. The profits, which beat estimates, got a boost from strength in Disney's parks and resorts and media network business segments.
Tuesday, October 25, 2011
U.S Economic News for week ending October 21, 2011
Stocks wavered throughout the week as investors watched for news that European leaders were producing a viable plan to stabilize European economies and banks. Better-than-expected corporate earnings reports from many companies buoyed markets.
U.S. and global economic news
European leaders struggle to seal debt deal
Throughout the week European policymakers captured the attention of investors as they worked to come up with a deal to contain the European debt and banking crisis. Finance ministers met in Brussels on Friday to lay the groundwork for an October 23 gathering of government leaders that was to have been the deadline for a solution to the debt crisis. However, another summit was scheduled for October 26 after Germany and France, on Thursday, said that the European Union needed more time to seal a "global and ambitious" accord.
Moody's cuts Spain's debt rating, warns France
Moody's Investors Service downgraded Spain's government bond rating two notches in response to the country's fading growth prospects. The credit rating agency also warned France about its credit rating, noting that France in the months ahead will face challenges such as the possible need to support other European sovereigns or its own. Those challenges are exerting pressure on the stable outlook of France's AAA-debt rating.
China's economic growth slows
China's economy in the third quarter grew 9.1% from a year earlier, the slowest pace since 2009. The news drove global stocks lower amid investor fear that Europe's debt crisis would hinder the global recovery. The economy grew 9.5% in the second quarter of this year.
U.S. existing home sales fall 3%
The National Association of Realtors reported that existing home sales fell 3% in September to a 4.91 million annual rate. The median home price dropped 3.5% from a year ago and about one in five real estate agents polled said contracts had been cancelled. U.S. home construction rose in September, with work beginning on 658,000 homes.
U.S. and global corporate news
Big U.S. banks report mixed results as earnings season heats up
Morgan Stanley saw a $2.15 billion profit for the third quarter. Goldman Sachs reported a rare quarterly loss, and Bank of America lost its title as the biggest U.S. bank by assets to JPMorgan Chase. Microsoft saw 6.1% gains in its net income helped by sales of its Office product. Intel's profit rose 17%, and the company reported its sixth straight quarter of record sales. General Electric's earnings climbed 11% in the third quarter as the finance unit's gains were able to override tighter profit margins in the energy business. Schlumberger, the world's largest oil field services provider, reported third-quarter profits that missed expectation as income from Asia and the Middle East declined. Philip Morris International, the largest publicly traded tobacco company, reported a 30% increase in profit. Higher shipment levels and increased cigarette prices in Asia helped the company beat profit estimates.
iPhone helps Verizon double profits; AT&T suffers as it loses sole carrier status
Verizon's profit doubled in the third quarter as consumers bought its iPhone and Android devices. AT&T’s profit fell 70.6% in the third quarter from a year ago as net income dropped to $3.62 billion from $12.3 billion in the same quarter last year. Last year’s income was boosted by the sale of a subsidiary and a tax settlement. The company, which this year lost the exclusive contract with Apple to carry the iPhone, said it added less than one-half the number of contract customers than it did a year earlier. Also hurting it bottom line, iPhone activations slowed to 2.7 million, nearly one million fewer than in the second quarter. Meanwhile, Apple's profit climbed 54% but missed expectations because it sold fewer-than-expected iPhones.
Groupon tempers IPO
Groupon, the largest online coupon site, is seeking an $11.4 billion valuation from its initial public offering. That is less than one-half the amount discussed with banks earlier this year. The company will offer 30 million shares of Class A common stock at $16 to $18 each.
U.S. and global economic news
European leaders struggle to seal debt deal
Throughout the week European policymakers captured the attention of investors as they worked to come up with a deal to contain the European debt and banking crisis. Finance ministers met in Brussels on Friday to lay the groundwork for an October 23 gathering of government leaders that was to have been the deadline for a solution to the debt crisis. However, another summit was scheduled for October 26 after Germany and France, on Thursday, said that the European Union needed more time to seal a "global and ambitious" accord.
Moody's cuts Spain's debt rating, warns France
Moody's Investors Service downgraded Spain's government bond rating two notches in response to the country's fading growth prospects. The credit rating agency also warned France about its credit rating, noting that France in the months ahead will face challenges such as the possible need to support other European sovereigns or its own. Those challenges are exerting pressure on the stable outlook of France's AAA-debt rating.
China's economic growth slows
China's economy in the third quarter grew 9.1% from a year earlier, the slowest pace since 2009. The news drove global stocks lower amid investor fear that Europe's debt crisis would hinder the global recovery. The economy grew 9.5% in the second quarter of this year.
U.S. existing home sales fall 3%
The National Association of Realtors reported that existing home sales fell 3% in September to a 4.91 million annual rate. The median home price dropped 3.5% from a year ago and about one in five real estate agents polled said contracts had been cancelled. U.S. home construction rose in September, with work beginning on 658,000 homes.
U.S. and global corporate news
Big U.S. banks report mixed results as earnings season heats up
Morgan Stanley saw a $2.15 billion profit for the third quarter. Goldman Sachs reported a rare quarterly loss, and Bank of America lost its title as the biggest U.S. bank by assets to JPMorgan Chase. Microsoft saw 6.1% gains in its net income helped by sales of its Office product. Intel's profit rose 17%, and the company reported its sixth straight quarter of record sales. General Electric's earnings climbed 11% in the third quarter as the finance unit's gains were able to override tighter profit margins in the energy business. Schlumberger, the world's largest oil field services provider, reported third-quarter profits that missed expectation as income from Asia and the Middle East declined. Philip Morris International, the largest publicly traded tobacco company, reported a 30% increase in profit. Higher shipment levels and increased cigarette prices in Asia helped the company beat profit estimates.
iPhone helps Verizon double profits; AT&T suffers as it loses sole carrier status
Verizon's profit doubled in the third quarter as consumers bought its iPhone and Android devices. AT&T’s profit fell 70.6% in the third quarter from a year ago as net income dropped to $3.62 billion from $12.3 billion in the same quarter last year. Last year’s income was boosted by the sale of a subsidiary and a tax settlement. The company, which this year lost the exclusive contract with Apple to carry the iPhone, said it added less than one-half the number of contract customers than it did a year earlier. Also hurting it bottom line, iPhone activations slowed to 2.7 million, nearly one million fewer than in the second quarter. Meanwhile, Apple's profit climbed 54% but missed expectations because it sold fewer-than-expected iPhones.
Groupon tempers IPO
Groupon, the largest online coupon site, is seeking an $11.4 billion valuation from its initial public offering. That is less than one-half the amount discussed with banks earlier this year. The company will offer 30 million shares of Class A common stock at $16 to $18 each.
Tuesday, October 18, 2011
U.S Economic News for week ending October 14, 2011
Stocks rose for the third week despite a rash of downgrades that put financial shares under pressure. Investor sentiment got a boost as Group of 20 policymakers began talks on ways to tame the European debt crisis and amid optimism about plans to recapitalize eurozone banks. Solid earnings from Google also gave markets a lift late in the week.
U.S. and global economic news
G 20 starts talks on eurozone rescue plan
The Group of 20 nations began talks to contain Europe's debt woes. Policymakers are discussing an expansion of the International Monetary Fund's role as they seek to come up with rescue measures for the region. Some officials are considering boosting the IMF's lending capacity. On Wednesday the European Commission set out its plan to shore up European banks.
S&P downgrades Spain to AA-
Standard & Poor's Ratings Services downgraded Spain for the third time in three years as slowing growth and rising defaults threaten banks and undermine efforts to contain Europe's sovereign debt crisis. Its rating was lowered one level to AA-.
Harrisburg, Pennsylvania files for bankruptcy
Pennsylvania's capital city, Harrisburg, filed for bankruptcy protection from creditors after a faction of the city council repeatedly rejected a state-backed plan that called for selling or leasing assets to pay down debt. The case is being closely watched by other cities and towns looking for ways out of financial troubles. Harrisburg is the second city to file for such Chapter 9 protection this year. In August, Central Falls, Rhode Island filed for bankruptcy protection after retired city workers refused to accept an offer to cut their pensions.
U.S. retail sales rise more than expected
U.S. retail sales rose a more-than-expected 1.1% in September as consumers spent more on cars, clothing, and fuel. The gains were broad based and also seen in restaurants, furniture, and department stores. The increase eased some concern that slumping consumer confidence will hurt spending.
U.S. trade gap with China hits record
The U.S. trade gap with China, the fastest growing major market, widened 7.4% to a new record in August — $28.96 billion. Globally, the U.S. trade deficit narrowed to $45.61 billion.
European inflation accelerates
European inflation accelerated to 3% in September, the fastest pace in almost three years, amid rising energy costs. The inflation complicates the job of the European Central Bank as it seeks to keep interest rates low to combat the region's debt woes.
U.S. and global corporate news
Fitch downgrades UBS, RBS, and Lloyds
Fitch Ratings downgraded Swiss banking giant UBS and foreshadowed possible ratings cuts for other European banks as the lenders continued to grapple with the debt problems. UBS' long-term issuer default rating was cut to A from A+ as the bank struggles to recover from a multi-billion-dollar trading scandal that has already triggered a slew of management changes. Fitch said it was concerned about waning government support for the bank. This week, Fitch also cut ratings on Royal Bank of Scotland and Lloyds Banking Group after determining they are also less likely to receive government support in the future. RBS and Lloyds are 83% and 41% state-held, respectively. Both were downgraded two notches to A from
AA-. Barclays, which has never taken direct state support and is rated
AA-, was put on Ratings Watch Negative.
Apple's iPhone 4S hits stores
Apple's iPhone 4S hit stores on Friday and sold out for preorder at AT&T, Verizon Wireless, and Sprint Nextel on Thursday. Apple said that it had received more than 1 million iPhone pre-orders — a record for the company — on October 7, the first day of preorders.
Google's profits jump 26%
Google's profits rose a better-than-expected 26% in the third quarter, and revenue jumped 33% amid record spending on online advertising.
JPMorgan's profits fall 33%
JPMorgan Chase reported its profits fell 33% because of weak results in its investment-banking operations, which were not offset by strong lending and revenue gains. JPMorgan Chase is the first of the big banks to report results and is watched as a barometer.
BofA to cut 324 New York jobs
Bank of America plans to cut 324 jobs in New York beginning next month. The reduction will include investment bankers and equity traders and comes as the lender seeks to reduce expenses after losing half its market value. The cuts are part of plans to eliminate 3,500 jobs that were announced in August.
U.S. and global economic news
G 20 starts talks on eurozone rescue plan
The Group of 20 nations began talks to contain Europe's debt woes. Policymakers are discussing an expansion of the International Monetary Fund's role as they seek to come up with rescue measures for the region. Some officials are considering boosting the IMF's lending capacity. On Wednesday the European Commission set out its plan to shore up European banks.
S&P downgrades Spain to AA-
Standard & Poor's Ratings Services downgraded Spain for the third time in three years as slowing growth and rising defaults threaten banks and undermine efforts to contain Europe's sovereign debt crisis. Its rating was lowered one level to AA-.
Harrisburg, Pennsylvania files for bankruptcy
Pennsylvania's capital city, Harrisburg, filed for bankruptcy protection from creditors after a faction of the city council repeatedly rejected a state-backed plan that called for selling or leasing assets to pay down debt. The case is being closely watched by other cities and towns looking for ways out of financial troubles. Harrisburg is the second city to file for such Chapter 9 protection this year. In August, Central Falls, Rhode Island filed for bankruptcy protection after retired city workers refused to accept an offer to cut their pensions.
U.S. retail sales rise more than expected
U.S. retail sales rose a more-than-expected 1.1% in September as consumers spent more on cars, clothing, and fuel. The gains were broad based and also seen in restaurants, furniture, and department stores. The increase eased some concern that slumping consumer confidence will hurt spending.
U.S. trade gap with China hits record
The U.S. trade gap with China, the fastest growing major market, widened 7.4% to a new record in August — $28.96 billion. Globally, the U.S. trade deficit narrowed to $45.61 billion.
European inflation accelerates
European inflation accelerated to 3% in September, the fastest pace in almost three years, amid rising energy costs. The inflation complicates the job of the European Central Bank as it seeks to keep interest rates low to combat the region's debt woes.
U.S. and global corporate news
Fitch downgrades UBS, RBS, and Lloyds
Fitch Ratings downgraded Swiss banking giant UBS and foreshadowed possible ratings cuts for other European banks as the lenders continued to grapple with the debt problems. UBS' long-term issuer default rating was cut to A from A+ as the bank struggles to recover from a multi-billion-dollar trading scandal that has already triggered a slew of management changes. Fitch said it was concerned about waning government support for the bank. This week, Fitch also cut ratings on Royal Bank of Scotland and Lloyds Banking Group after determining they are also less likely to receive government support in the future. RBS and Lloyds are 83% and 41% state-held, respectively. Both were downgraded two notches to A from
AA-. Barclays, which has never taken direct state support and is rated
AA-, was put on Ratings Watch Negative.
Apple's iPhone 4S hits stores
Apple's iPhone 4S hit stores on Friday and sold out for preorder at AT&T, Verizon Wireless, and Sprint Nextel on Thursday. Apple said that it had received more than 1 million iPhone pre-orders — a record for the company — on October 7, the first day of preorders.
Google's profits jump 26%
Google's profits rose a better-than-expected 26% in the third quarter, and revenue jumped 33% amid record spending on online advertising.
JPMorgan's profits fall 33%
JPMorgan Chase reported its profits fell 33% because of weak results in its investment-banking operations, which were not offset by strong lending and revenue gains. JPMorgan Chase is the first of the big banks to report results and is watched as a barometer.
BofA to cut 324 New York jobs
Bank of America plans to cut 324 jobs in New York beginning next month. The reduction will include investment bankers and equity traders and comes as the lender seeks to reduce expenses after losing half its market value. The cuts are part of plans to eliminate 3,500 jobs that were announced in August.
Friday, October 7, 2011
U.S. economic news for the week ended October 7, 2011
Stocks clawed their way back this week from near bear-market territory amid optimism that European leaders are making progress in containing the region's sovereign debt crisis and as better-than-expected U.S. economic data added to evidence that the United States is maintaining its expansion.
U.S. and global economic news
ECB resumes bond purchases
The European Central Bank resumed covered bond purchases and reintroduced year-long loans for banks. The central bank, however, did not cut interest rates, keeping its benchmark at 1.5% at its meeting this week. The ECB did acknowledge that the downside risks to the economy have intensified. Meanwhile the European Commission has been pushing for a coordinated capital injection for banks to shield them from the fallout of a potential Greek debt default.
BOE expands bond-buying program
The Bank of England this week expanded its bond-buying program for the first time in two years. The bank raised the ceiling for so-called quantitative easing to £275 billion from £200 billion in an effort to stop the euro region debt crisis from pushing the U.K. economy back into recession.
U.S. employers add more jobs than expected
The U.S. Department of Labor reported that employers added more jobs that expected in September and that job gains were revised up for the prior two months. The news eased some concern over the possibility of renewed recession, although the pace of job growth is still too slow to push down the unemployment rate, which held at 9.1%. Payrolls rose by 103,000.
Other U.S. data also positive
Other encouraging U.S. economic news helped bolster investor sentiment this week. U.S. manufacturing unexpectedly accelerated in September, and service sector activity and same-store sales results from retailers topped expectations.
Japan's Tankan shows manufacturers' sentiment still weak
The Bank of Japan's quarterly Tankan index of sentiment at large manufacturers rose to 2 in September from - 9 in June. The reading shows that sentiment is worse than it was before the March earthquake, a signal that concern over a weakening global demand will restrain the nation's recovery.
U.S. and global corporate news
Moody's downgrades U.K. and Portuguese banks
Moody's Investors Service cut the senior debt and deposit ratings of 12 British lenders, noting that the government would be less likely to provide support for the banks in the event of failure. The Bank of England, the Financial Services Authority, and the Treasury have said that in the future banks that fail should not expect a taxpayer-funded bailout. Lloyds TSB Bank, Santander UK, and Co-operative Bank had their ratings lowered one step while Royal Bank of Scotland and Nationwide Building Society were cut two levels. Moody's also lowered its standalone ratings for six Portuguese banks, citing lower asset quality, increased risk from Portuguese sovereign debt holdings, and funding strains.
Apple's shares hold steady after Jobs' death; iPhone 4S debut.
Apple's shares held steady following the death of Steve Jobs, Apple's chairman and cofounder. Jobs had battled pancreatic cancer and stepped down as chief executive in August. His death came two days after Apple debuted its iPhone 4S. The long awaited device will use two antennas to improve call quality and a processor that is seven times faster than the chip in the previous iPhone.
Sprint to offer iPhone
Sprint Nextel struck a deal to offer Apple's iPhone, joining rivals AT&T and Verizon. Sprint had been struggling to compete with those rivals, who were able to lure potential customers with the offer of the iPhone.
Dexia to split up
Franco-Belgian bank Dexia announced a planned breakup to protect its Belgian depositors and its municipal-lending business in France. France and Belgium are trying to split up, bank's assets in a manner designed to avoid injecting more capital. Trading in Dexia's shares was suspended on Thursday as governments and the bank's management scrambled to figure out what to do with the lender. The bank is said to have heavy exposure to Greek and Italian debt, a factor that has made other financial institution wary of lending to it.
Friendly's files for Chapter 11
Hurt by a weak economy and rising commodity costs, the Friendly's restaurant chain filed for Chapter 11 bankruptcy protection.
U.S. and global economic news
ECB resumes bond purchases
The European Central Bank resumed covered bond purchases and reintroduced year-long loans for banks. The central bank, however, did not cut interest rates, keeping its benchmark at 1.5% at its meeting this week. The ECB did acknowledge that the downside risks to the economy have intensified. Meanwhile the European Commission has been pushing for a coordinated capital injection for banks to shield them from the fallout of a potential Greek debt default.
BOE expands bond-buying program
The Bank of England this week expanded its bond-buying program for the first time in two years. The bank raised the ceiling for so-called quantitative easing to £275 billion from £200 billion in an effort to stop the euro region debt crisis from pushing the U.K. economy back into recession.
U.S. employers add more jobs than expected
The U.S. Department of Labor reported that employers added more jobs that expected in September and that job gains were revised up for the prior two months. The news eased some concern over the possibility of renewed recession, although the pace of job growth is still too slow to push down the unemployment rate, which held at 9.1%. Payrolls rose by 103,000.
Other U.S. data also positive
Other encouraging U.S. economic news helped bolster investor sentiment this week. U.S. manufacturing unexpectedly accelerated in September, and service sector activity and same-store sales results from retailers topped expectations.
Japan's Tankan shows manufacturers' sentiment still weak
The Bank of Japan's quarterly Tankan index of sentiment at large manufacturers rose to 2 in September from - 9 in June. The reading shows that sentiment is worse than it was before the March earthquake, a signal that concern over a weakening global demand will restrain the nation's recovery.
U.S. and global corporate news
Moody's downgrades U.K. and Portuguese banks
Moody's Investors Service cut the senior debt and deposit ratings of 12 British lenders, noting that the government would be less likely to provide support for the banks in the event of failure. The Bank of England, the Financial Services Authority, and the Treasury have said that in the future banks that fail should not expect a taxpayer-funded bailout. Lloyds TSB Bank, Santander UK, and Co-operative Bank had their ratings lowered one step while Royal Bank of Scotland and Nationwide Building Society were cut two levels. Moody's also lowered its standalone ratings for six Portuguese banks, citing lower asset quality, increased risk from Portuguese sovereign debt holdings, and funding strains.
Apple's shares hold steady after Jobs' death; iPhone 4S debut.
Apple's shares held steady following the death of Steve Jobs, Apple's chairman and cofounder. Jobs had battled pancreatic cancer and stepped down as chief executive in August. His death came two days after Apple debuted its iPhone 4S. The long awaited device will use two antennas to improve call quality and a processor that is seven times faster than the chip in the previous iPhone.
Sprint to offer iPhone
Sprint Nextel struck a deal to offer Apple's iPhone, joining rivals AT&T and Verizon. Sprint had been struggling to compete with those rivals, who were able to lure potential customers with the offer of the iPhone.
Dexia to split up
Franco-Belgian bank Dexia announced a planned breakup to protect its Belgian depositors and its municipal-lending business in France. France and Belgium are trying to split up, bank's assets in a manner designed to avoid injecting more capital. Trading in Dexia's shares was suspended on Thursday as governments and the bank's management scrambled to figure out what to do with the lender. The bank is said to have heavy exposure to Greek and Italian debt, a factor that has made other financial institution wary of lending to it.
Friendly's files for Chapter 11
Hurt by a weak economy and rising commodity costs, the Friendly's restaurant chain filed for Chapter 11 bankruptcy protection.
Friday, September 30, 2011
U.S. economic news for the week ended September 30, 2011
Major U.S. stock indices were mixed this week as more signs of a slowing global economy contrasted with optimism that European leaders were making headway on plans to manage the region's sovereign debt crisis.
U.S. and global economic news
Germany agrees to increase bailout contribution
Germany's parliament approved legislation to increase the eurozone bailout fund's lending capacity to 440 billion, from around 250 billion, and to make the fund more flexible. The move was lauded as the clearing of a major hurdle in the path to the containment of Europe's sovereign debt crisis. Also this week, the Greek Parliament approved a new property tax law in a closely watched vote, a key step in the country's efforts to secure further aid.
Standard & Poor's and Fitch downgrade New Zealand's debt
Standard & Poor's and Fitch Ratings downgraded New Zealand's local currency debt amid concern that government and household debt are expanding. New Zealand is the first Asia-Pacific nation in a decade to have its debt cut from AAA. S&P cut the local currency debt one level to AA+. Foreign currency debt was cut to AA from AA+.
Eurozone inflation hits three-year high
European inflation unexpectedly accelerated at the fastest pace in almost three years; the rate for September jumped to 3% from 2.5% in August. The increase further complicated the work of the European Central Bank as it fights to contain the region's debt crisis. Germany's inflation rate rose in September to 2.8%, from 2.5% in August.
Chinese manufacturing shrinks for third month
Chinese manufacturing shrank for the third month in a row as measures of new orders and export demand fell.
U.S. consumer spending, new home sales fall
U.S. consumer spending slowed in August as incomes unexpectedly dropped for the first time in almost two years; that drop forced households to dig into their savings. Purchases rose 0.2% after a 0.7% increase the previous month. Also in August, sales of new homes fell to a seasonally adjusted annual rate of 295,000, which was down from 302,000 a month earlier. The inventory of new homes fell to 162,000, the lowest level on record since 1963. In July U.S. home prices rose for a fourth month but remain lower than they were a year ago.
U.S. and global corporate news
Amazon debuts Kindle Fire
Amazon, the world's largest online retailer, debuted its e-reader Kindle Fire. The company is betting that its device, which is smaller and less than half the price of Apple's iPad, can present a challenge to that popular product.
BofA to charge for debit card use
Bank of America announced plans to charge customers $5 per month to use their debit cards. Other banks are expected to follow with similar moves, which are intended to make up for funds lost to a new regulation that puts a cap on how much banks can charge merchants for debit card transactions.
U.S. and global economic news
Germany agrees to increase bailout contribution
Germany's parliament approved legislation to increase the eurozone bailout fund's lending capacity to 440 billion, from around 250 billion, and to make the fund more flexible. The move was lauded as the clearing of a major hurdle in the path to the containment of Europe's sovereign debt crisis. Also this week, the Greek Parliament approved a new property tax law in a closely watched vote, a key step in the country's efforts to secure further aid.
Standard & Poor's and Fitch downgrade New Zealand's debt
Standard & Poor's and Fitch Ratings downgraded New Zealand's local currency debt amid concern that government and household debt are expanding. New Zealand is the first Asia-Pacific nation in a decade to have its debt cut from AAA. S&P cut the local currency debt one level to AA+. Foreign currency debt was cut to AA from AA+.
Eurozone inflation hits three-year high
European inflation unexpectedly accelerated at the fastest pace in almost three years; the rate for September jumped to 3% from 2.5% in August. The increase further complicated the work of the European Central Bank as it fights to contain the region's debt crisis. Germany's inflation rate rose in September to 2.8%, from 2.5% in August.
Chinese manufacturing shrinks for third month
Chinese manufacturing shrank for the third month in a row as measures of new orders and export demand fell.
U.S. consumer spending, new home sales fall
U.S. consumer spending slowed in August as incomes unexpectedly dropped for the first time in almost two years; that drop forced households to dig into their savings. Purchases rose 0.2% after a 0.7% increase the previous month. Also in August, sales of new homes fell to a seasonally adjusted annual rate of 295,000, which was down from 302,000 a month earlier. The inventory of new homes fell to 162,000, the lowest level on record since 1963. In July U.S. home prices rose for a fourth month but remain lower than they were a year ago.
U.S. and global corporate news
Amazon debuts Kindle Fire
Amazon, the world's largest online retailer, debuted its e-reader Kindle Fire. The company is betting that its device, which is smaller and less than half the price of Apple's iPad, can present a challenge to that popular product.
BofA to charge for debit card use
Bank of America announced plans to charge customers $5 per month to use their debit cards. Other banks are expected to follow with similar moves, which are intended to make up for funds lost to a new regulation that puts a cap on how much banks can charge merchants for debit card transactions.
Thursday, September 29, 2011
U.S. economic news for the week ended September 23, 2011
Global stocks tumbled this week in response to evidence that global growth is decelerating and increasing fears of a Greek debt default. As investors dumped all things considered risky, the yield on the 10-year U.S. Treasury note fell to a record low, and oil dipped below $80 per barrel. Fresh data, showing a decline in manufacturing activity in both China and Europe, added to the worries, and World Bank President Robert Zoellick warned that the global economy is in a "danger zone." Vows by G20 officials to preserve banking stability and markets and new efforts by the U.S. Federal Reserve Board to reduce borrowing costs failed to significantly buoy sentiment as banks across the eurozone and the United States were downgraded and data everywhere showed a downturn.
U.S. and global economic news
IMF cuts global growth forecast
The International Monetary Fund cut its forecast for global growth to 4% and warned that severe repercussions to the global economy can be avoided only if eurozone nations strengthen their banking system and the United States gets its fiscal house in order. The IMF said the U.S. and European economies face recession and a lost decade of growth similar to what happened in Japan if they fail to take concerted action to revamp their economic policies.
Fed debuts "Operation Twist" to push interest rates lower
The U.S. Fed said on Wednesday that in a move to further reduce borrowing costs to keep the economy from falling into recession, it will replace much of the short-term debt in its portfolio with longer-term Treasuries. In what economists have dubbed "Operation Twist," the Fed will actively sell Treasuries with maturities of three years and less and buy Treasuries with maturities of six- to 30-years.The Fed will spend $400 billion on the program that is intended to put downward pressure on longer-term interest rates to make it cheaper for consumers to finance long-term purchases.
S&P cuts debt rating of Italy and some of its banks
Standard & Poor's Ratings Services cut Italy's sovereign debt rating one notch, saying the nation's weak economic growth and fragile government coalition will make it harder to head off the crisis sweeping the eurozone. The agency went so far as to say that paralysis in Prime Minister Silvio Berlusconi's governing coalition has become an obstacle to overhauling the country's stagnant economy. In the wake of the sovereign downgrade, S&P also cut the ratings of several Italian lenders. The ratings agency cut the long-term ratings of Italian banking giant Intesa Sanpaolo SpA and investment bank Mediobanca SpA to single-A from A-plus to bring the lenders' credit rating in line with the host country. S&P also cut its rating of the Italian subsidiaries of French bank BNP Paribas. The long-term rating of BNP's Findomestic Banca was cut to A from A+, while the long- and short-term rating on the French lender's Banca Nazionale del Lavoro subsidiary was lowered to A+/A-1 from AA-/A-1+.
Eurozone data shows slowdown
Business activity in the eurozone contracted in September for the first time in more than two years. The contraction is seen as the strongest evidence to date that the global slowdown and European debt crisis are pushing the eurozone to the brink of recession. The eurozone PMI (Purchasing Managers' Index) for September dropped 1.5 points to 49.2, according to data provider Markit. A drop below 50 signals contraction.
German investor confidence drops to lowest level in two-and-a-half years
German investor confidence fell to the lowest level in more than two-and-a-half years in September as Europe's debt crisis and global slowdown damped the outlook for growth. The ZEW Centre for European Economic Research said its index of investor and analyst expectations, which aims to predict developments six months in advance, fell to minus 43.3 from minus 37.6 in August.
U.S. housing starts fall to three-month low
U.S. housing starts dropped 5% to a 571,000 annual rate, a three-month low. Residential construction has been constrained by foreclosures, declining prices, and a lack of employment. Still building permits, which are proxies for future construction, climbed 3.2% to a 620,000 annual rate in August. That was the highest level this year.
U.S. and global corporate news
Moody's downgrades U.S. and Greek banks
Moody's Investor's Service cut the long-term credit ratings of Bank of America and Wells Fargo. Moody's cited a decreasing possibility that the United States would support the lenders in an emergency. Citigroup's short-term rating was also cut. Bank of America's ratings were cut to Baa1 from A2 for long-term debt and to Prime 2 from Prime 1 for short-term debt. The outlook on long-term senior ratings remains negative. Wells Fargo's senior debt was downgraded to A2 from A1; the outlook remains negative on the senior long-term ratings. The ratings agency also downgraded eight Greek banks by two notches Friday, citing expected losses from the banks' holdings of Greek government bonds. National Bank of Greece, EFG Eurobank Ergasias, Alpha Bank, Piraeus Bank, Agricultural Bank of Greece, and Attica Bank were downgraded by Moody's to Caa2 from B3. Emporiki Bank of Greece and General Bank of Greece were downgraded to B3 from B1.
Tyco to break up
Tyco International said it will break up into three companies, another sign that the era of the conglomerate is drawing to a close.
Oracle's profit jumps 36%
Oracle's first-quarter profit climbed 36% on strong sales in its core software business. Sales of the company's hardware systems dropped, however.
U.S. and global economic news
IMF cuts global growth forecast
The International Monetary Fund cut its forecast for global growth to 4% and warned that severe repercussions to the global economy can be avoided only if eurozone nations strengthen their banking system and the United States gets its fiscal house in order. The IMF said the U.S. and European economies face recession and a lost decade of growth similar to what happened in Japan if they fail to take concerted action to revamp their economic policies.
Fed debuts "Operation Twist" to push interest rates lower
The U.S. Fed said on Wednesday that in a move to further reduce borrowing costs to keep the economy from falling into recession, it will replace much of the short-term debt in its portfolio with longer-term Treasuries. In what economists have dubbed "Operation Twist," the Fed will actively sell Treasuries with maturities of three years and less and buy Treasuries with maturities of six- to 30-years.The Fed will spend $400 billion on the program that is intended to put downward pressure on longer-term interest rates to make it cheaper for consumers to finance long-term purchases.
S&P cuts debt rating of Italy and some of its banks
Standard & Poor's Ratings Services cut Italy's sovereign debt rating one notch, saying the nation's weak economic growth and fragile government coalition will make it harder to head off the crisis sweeping the eurozone. The agency went so far as to say that paralysis in Prime Minister Silvio Berlusconi's governing coalition has become an obstacle to overhauling the country's stagnant economy. In the wake of the sovereign downgrade, S&P also cut the ratings of several Italian lenders. The ratings agency cut the long-term ratings of Italian banking giant Intesa Sanpaolo SpA and investment bank Mediobanca SpA to single-A from A-plus to bring the lenders' credit rating in line with the host country. S&P also cut its rating of the Italian subsidiaries of French bank BNP Paribas. The long-term rating of BNP's Findomestic Banca was cut to A from A+, while the long- and short-term rating on the French lender's Banca Nazionale del Lavoro subsidiary was lowered to A+/A-1 from AA-/A-1+.
Eurozone data shows slowdown
Business activity in the eurozone contracted in September for the first time in more than two years. The contraction is seen as the strongest evidence to date that the global slowdown and European debt crisis are pushing the eurozone to the brink of recession. The eurozone PMI (Purchasing Managers' Index) for September dropped 1.5 points to 49.2, according to data provider Markit. A drop below 50 signals contraction.
German investor confidence drops to lowest level in two-and-a-half years
German investor confidence fell to the lowest level in more than two-and-a-half years in September as Europe's debt crisis and global slowdown damped the outlook for growth. The ZEW Centre for European Economic Research said its index of investor and analyst expectations, which aims to predict developments six months in advance, fell to minus 43.3 from minus 37.6 in August.
U.S. housing starts fall to three-month low
U.S. housing starts dropped 5% to a 571,000 annual rate, a three-month low. Residential construction has been constrained by foreclosures, declining prices, and a lack of employment. Still building permits, which are proxies for future construction, climbed 3.2% to a 620,000 annual rate in August. That was the highest level this year.
U.S. and global corporate news
Moody's downgrades U.S. and Greek banks
Moody's Investor's Service cut the long-term credit ratings of Bank of America and Wells Fargo. Moody's cited a decreasing possibility that the United States would support the lenders in an emergency. Citigroup's short-term rating was also cut. Bank of America's ratings were cut to Baa1 from A2 for long-term debt and to Prime 2 from Prime 1 for short-term debt. The outlook on long-term senior ratings remains negative. Wells Fargo's senior debt was downgraded to A2 from A1; the outlook remains negative on the senior long-term ratings. The ratings agency also downgraded eight Greek banks by two notches Friday, citing expected losses from the banks' holdings of Greek government bonds. National Bank of Greece, EFG Eurobank Ergasias, Alpha Bank, Piraeus Bank, Agricultural Bank of Greece, and Attica Bank were downgraded by Moody's to Caa2 from B3. Emporiki Bank of Greece and General Bank of Greece were downgraded to B3 from B1.
Tyco to break up
Tyco International said it will break up into three companies, another sign that the era of the conglomerate is drawing to a close.
Oracle's profit jumps 36%
Oracle's first-quarter profit climbed 36% on strong sales in its core software business. Sales of the company's hardware systems dropped, however.
Friday, September 16, 2011
U.S. economic news for the week ended September 16, 2011
Stocks made significant gains this week after investors were encouraged by central banks vowing to pump dollars into the European banking system to avert a liquidity crisis. All eyes remain on Europe and its leaders' determination to control its debt crisis. On Friday, as concern intensified about Greek debt and the eurozone's financial stability, European finance ministers and U.S. Treasury Secretary Timothy Geithner began a two-day meeting in Wroclaw, Poland, to tackle the crisis.
U.S. and global economic news
Central banks join forces to stem liquidity crisis
The European Central Bank said it will lend dollars to euro-area banks in a series of three-month loans to ensure that the banks have enough U.S. currency through the end of the year. The ECB will coordinate the action with the U.S. Federal Reserve Board and other central banks. The move came this week after two banks borrowed from the ECB's seven-day offerings. The announcement was seen as a sign that the banks are having difficulty accessing U.S. currency as Europe's debt crisis makes financial institutions wary of lending. Earlier in the week, French and German leaders confirmed that they will support Greece's continued participation in the shared euro currency.
SNB vows to defend currency; leaves rate at zero
The Swiss National Bank left its three-month Libor target rate at zero after unexpectedly lowering the benchmark from 0.25% last month. The bank said it is ready to take "further measures" if needed to cap gains in the Swiss franc against the euro.
U.S. economic data show continued slowing
U.S. retail sales remained unchanged in August as the sluggish labor market and limited income growth took a toll on consumers. Prices paid by producers were also unchanged in August, according to the U.S. Department of Labor, while the so-called core costs that exclude food and fuel rose less than forecast. The Consumer Price Index for August showed an inflation rate of 0.4%, with a core rate of 0.2%. Meanwhile, a report from the U.S. Department of Commerce showed inventories rose less than forecast in July. Initial claims for unemployment benefits were worse than expected last week.
Container trade points to weakening global economy
The Port of Long Beach's total container trade fell 6.9% in August. The drop was the largest in five months. Weaker global trade could push the economy closer to recession.
U.S. and global corporate news
Moody's downgrades Société Générale and Crédit Agricole
Moody's Investors Service downgraded its long-term ratings of Société Générale and Crédit Agricole by one notch. Moody's cited the level of state support that SocGen received and Crédit Agricole's significant Greek holdings as reasons behind the downgrade.
UBS trader loses $2 billion; BofA to cut 30,000 jobs; Morgan Stanley's Mack to exit post
UBS shares lost ground after the Swiss bank said it would likely post a third-quarter loss after a rogue trader racked up as much as $2 billion in losses using the firm's own money. The incident raised fears among investors about the bank's ability to manage risk and global regulators' ability to monitor it. Bank of America announced a $5 billion cost reduction plan that would include the elimination of 30,000 jobs. The job cuts represent the largest single work force reduction in a U.S.-based company so far this year. Morgan Stanley's shares got a boost after the firm disclosed that Chairman and Chief Executive John Mack will step down from the board at the end of the year.
Best Buy reports 30% drop in profit
Best Buy, the world's largest electronics chain, reported a 30% drop in quarterly profit and cut its full-year earnings forecast. Best Buy's sales have come under pressure as shoppers, in search of better deals, shift to online rivals. The retailer said market share gains in smartphones and tablets did not offset declines in sales of televisions and computers.
RIM loses ground
Research in Motion's stock tumbled after the maker of BlackBerry announced it saw a year-over-year decline in shipments of its smartphones, the first decline in nearly a decade. RIM shares have lost more than one-half of their value this year as the company loses market share to Apple's iPhone and devices that run off Google's Android system. For the quarter ended August 27, RIM posted a profit 59% lower than for the same quarter last year.
U.S. and global economic news
Central banks join forces to stem liquidity crisis
The European Central Bank said it will lend dollars to euro-area banks in a series of three-month loans to ensure that the banks have enough U.S. currency through the end of the year. The ECB will coordinate the action with the U.S. Federal Reserve Board and other central banks. The move came this week after two banks borrowed from the ECB's seven-day offerings. The announcement was seen as a sign that the banks are having difficulty accessing U.S. currency as Europe's debt crisis makes financial institutions wary of lending. Earlier in the week, French and German leaders confirmed that they will support Greece's continued participation in the shared euro currency.
SNB vows to defend currency; leaves rate at zero
The Swiss National Bank left its three-month Libor target rate at zero after unexpectedly lowering the benchmark from 0.25% last month. The bank said it is ready to take "further measures" if needed to cap gains in the Swiss franc against the euro.
U.S. economic data show continued slowing
U.S. retail sales remained unchanged in August as the sluggish labor market and limited income growth took a toll on consumers. Prices paid by producers were also unchanged in August, according to the U.S. Department of Labor, while the so-called core costs that exclude food and fuel rose less than forecast. The Consumer Price Index for August showed an inflation rate of 0.4%, with a core rate of 0.2%. Meanwhile, a report from the U.S. Department of Commerce showed inventories rose less than forecast in July. Initial claims for unemployment benefits were worse than expected last week.
Container trade points to weakening global economy
The Port of Long Beach's total container trade fell 6.9% in August. The drop was the largest in five months. Weaker global trade could push the economy closer to recession.
U.S. and global corporate news
Moody's downgrades Société Générale and Crédit Agricole
Moody's Investors Service downgraded its long-term ratings of Société Générale and Crédit Agricole by one notch. Moody's cited the level of state support that SocGen received and Crédit Agricole's significant Greek holdings as reasons behind the downgrade.
UBS trader loses $2 billion; BofA to cut 30,000 jobs; Morgan Stanley's Mack to exit post
UBS shares lost ground after the Swiss bank said it would likely post a third-quarter loss after a rogue trader racked up as much as $2 billion in losses using the firm's own money. The incident raised fears among investors about the bank's ability to manage risk and global regulators' ability to monitor it. Bank of America announced a $5 billion cost reduction plan that would include the elimination of 30,000 jobs. The job cuts represent the largest single work force reduction in a U.S.-based company so far this year. Morgan Stanley's shares got a boost after the firm disclosed that Chairman and Chief Executive John Mack will step down from the board at the end of the year.
Best Buy reports 30% drop in profit
Best Buy, the world's largest electronics chain, reported a 30% drop in quarterly profit and cut its full-year earnings forecast. Best Buy's sales have come under pressure as shoppers, in search of better deals, shift to online rivals. The retailer said market share gains in smartphones and tablets did not offset declines in sales of televisions and computers.
RIM loses ground
Research in Motion's stock tumbled after the maker of BlackBerry announced it saw a year-over-year decline in shipments of its smartphones, the first decline in nearly a decade. RIM shares have lost more than one-half of their value this year as the company loses market share to Apple's iPhone and devices that run off Google's Android system. For the quarter ended August 27, RIM posted a profit 59% lower than for the same quarter last year.
Tuesday, September 13, 2011
U.S. economic news for the week ended September 9, 2010
Stocks were volatile this week as President Barack Obama's $447 billion plan to generate jobs failed to bolster investor confidence in the U.S. economy, and U.S. Federal Reserve Board Chairman Ben S. Bernanke disappointed markets by not detailing new plans to boost growth. Weakness in overseas markets added to the jitters as concerns over the likelihood of a Greek default mounted ahead of a meeting of finance ministers and central bankers from the Group of Seven leading economies in Marseilles, France. The euro fell to a nine-month low against the U.S. dollar, and Greek credit default swaps soared to record levels. Further unnerving markets this week were reports that the United States had received specific and "credible" information that al Qaeda is planning car and truck bombings in New York and Washington to coincide with the 10-year anniversary of the September 11 terrorist attacks.
U.S. and global economic news
Obama calls for extension of unemployment benefits
In the announcement of his $447 billion plan to spur growth, President Obama called on U.S. lawmakers to pass $62 billion in spending to extend unemployment insurance benefits through 2012 and fund programs to alleviate long-term joblessness.
Swiss central bank caps franc
The Swiss National Bank effectively put a cap on its currency, the Swiss franc. The bank said it would buy euros in "unlimited quantities" whenever the eurozone currency falls below 1.20 francs.
ECB and BOE keep rates unchanged
The European Central Bank and the Bank of England kept interest rates unchanged this week. ECB President Jean Claude Trichet warned that the eurozone's economy will grow more slowly than previously expected, between 1.4% and 1.8% in 2011, and between 0.4% and 2.2% in 2012. Trichet also said that risks to medium-term inflation have moderated, but he stopped short of signaling a change in the bank's interest rate path.
Greek credit default swaps hit record
Credit default swaps insuring Greek sovereign bonds jumped 212 basis points to a record 3,238 this week. The surge, which signals that investors believe there is more than a 90% chance that Greece will default, came after reports that the Greek economy shrank more than previously reported. The country's gross domestic product contracted 7.3% in the second quarter.
U.S. trade deficit posts biggest drop in over two years
In July the U.S. trade deficit posted its biggest drop in nearly two-and-one-half years as exports surged to a record high and oil prices fell from the near-three-year highs reached in May.
U.S. jobless claims rise
U.S. jobless claims rose more than expected last week, by 2,000 to 414,000, as the labor market continues its struggle to recover.
U.S. and global corporate news
Groupon cancels roadshow
Groupon canceled its investor roadshow and is reevaluating plans for an initial public offering amid the current market volatility.
Twitter boasts 100 million users
Twitter, the largest U.S. microblogging service, announced that it now has more than 100 million active users worldwide. Usage has increased more than 80% since the beginning of the year.
Google to buy Zagat
Google agreed to buy restaurant review company Zagat Survey as the Internet giant moved to take a share of revenue from local businesses. Earlier this year, Google entered into a two-year agreement with Local.com to implement certain advertising and search services.
Saab Automobile vowed to appeal the refusal of a Swedish court to grant the carmaker protection from creditors. The ruling essentially opens the way for labor unions representing unpaid workers to petition for bankruptcy and reclaim wages.
U.S. and global economic news
Obama calls for extension of unemployment benefits
In the announcement of his $447 billion plan to spur growth, President Obama called on U.S. lawmakers to pass $62 billion in spending to extend unemployment insurance benefits through 2012 and fund programs to alleviate long-term joblessness.
Swiss central bank caps franc
The Swiss National Bank effectively put a cap on its currency, the Swiss franc. The bank said it would buy euros in "unlimited quantities" whenever the eurozone currency falls below 1.20 francs.
ECB and BOE keep rates unchanged
The European Central Bank and the Bank of England kept interest rates unchanged this week. ECB President Jean Claude Trichet warned that the eurozone's economy will grow more slowly than previously expected, between 1.4% and 1.8% in 2011, and between 0.4% and 2.2% in 2012. Trichet also said that risks to medium-term inflation have moderated, but he stopped short of signaling a change in the bank's interest rate path.
Greek credit default swaps hit record
Credit default swaps insuring Greek sovereign bonds jumped 212 basis points to a record 3,238 this week. The surge, which signals that investors believe there is more than a 90% chance that Greece will default, came after reports that the Greek economy shrank more than previously reported. The country's gross domestic product contracted 7.3% in the second quarter.
U.S. trade deficit posts biggest drop in over two years
In July the U.S. trade deficit posted its biggest drop in nearly two-and-one-half years as exports surged to a record high and oil prices fell from the near-three-year highs reached in May.
U.S. jobless claims rise
U.S. jobless claims rose more than expected last week, by 2,000 to 414,000, as the labor market continues its struggle to recover.
U.S. and global corporate news
Groupon cancels roadshow
Groupon canceled its investor roadshow and is reevaluating plans for an initial public offering amid the current market volatility.
Twitter boasts 100 million users
Twitter, the largest U.S. microblogging service, announced that it now has more than 100 million active users worldwide. Usage has increased more than 80% since the beginning of the year.
Google to buy Zagat
Google agreed to buy restaurant review company Zagat Survey as the Internet giant moved to take a share of revenue from local businesses. Earlier this year, Google entered into a two-year agreement with Local.com to implement certain advertising and search services.
Saab Automobile vowed to appeal the refusal of a Swedish court to grant the carmaker protection from creditors. The ruling essentially opens the way for labor unions representing unpaid workers to petition for bankruptcy and reclaim wages.
Monday, September 12, 2011
U.S. economic news for the week ended September 2, 2011
U.S. job growth fizzled in August, according to both the U.S. Department of Labor’s monthly nonfarm jobs report and the private sector jobs report. In a very disappointing setback, the Labor Department showed no change in payrolls in August, far below expectations. U.S. and European stocks fell sharply in response to the report. Overall, however, major global stock indices showed gains for the week, which marked the end of the worst month in a decade for the U.S. stock market. Chinese stocks had their worst week in three months, as economic and earnings growth slumped while inflation remained at its highest level in three years. In Europe, the Stoxx Europe 600 Index had its strongest weekly rally since July. The U.S. 10-year Treasury yield fell to 2.05% as recessionary fears rose. Oil prices fell below $86 a barrel.
Globally, manufacturing activity appears to be sluggish, with Chinese and U.K. manufacturing activity dropping to multi-year lows. However, Germany’s economy continued to shine in contrast to many neighboring European countries, with bullish news on manufacturing and jobs.
The week began with some relief that the worst fears regarding Hurricane Irene had failed to materialize. The storm blew through Manhattan with little disruption to stock market operations. However, millions of households were affected throughout the eastern United States, a development that could at least temporarily weigh down economic activity.
U.S. and global economic news
U.S. job growth fizzles
U.S. employment stagnated in August, with no job growth, according to the monthly nonfarm payroll report released by the Labor Department Friday morning. It was the first time in 11 months there was no net increase in U.S. jobs. The disappointing news, however, was influenced by the 45,000 Verizon workers who were out of work because they were on strike at the time the report was compiled. Still, the report's employment picture fell far short of the 60,000- to 65,000-job gain that had been anticipated by economists, and the U.S. unemployment rate remained at 9.1%.
More significantly, the weak showing reflected a lack of confidence among U.S. employers following the debt-ceiling showdown in Washington, the S&P downgrade of U.S. debt, the plummeting stock market, and ongoing concerns about Europe’s sovereign debt crisis. While the report conveyed a flat employment picture, it did indicate an increase of 17,000 jobs in the private sector.
ADP reports 91,000 more private sector jobs
Private businesses added 91,000 jobs in August, on a seasonally adjusted basis, according to a report released by payroll giant Automatic Data Processing (ADP) and Macroeconomic Advisers, a consultancy. Almost all the hiring occurred at small businesses (a gain of 58,000) and medium-size businesses (30,000 new jobs). Businesses with 500 or more employees added only 3,000 jobs.
U.S. manufacturing growth stays surprisingly strong
U.S. manufacturing activity grew slightly in August, according to the Institute for Supply Management’s factory index, which fell slightly to 50.6 from 50.9 in July. Economists had expected a drop to 48.5.
Weekly jobless claims ease slightly in United States
Initial claims for unemployment benefits by U.S. workers fell by 12,000 to a seasonally adjusted 409,000 in the week ended August 27, according to the Labor Department. However, the four-week moving average of new claims rose by 1,750 to 410,250.
Consumer confidence indices slip
U.S. consumers lost confidence in August, according to several confidence gauges. The Conference Board’s index of consumer confidence dropped to 44.5 from 59.2 in July, its lowest reading since April 2009. The survey also showed that consumers expect inflation to rise to 5.8% in the next 12 months. Bloomberg’s Consumer Confidence Index fell to -49.1 from -47.0 in July, its second lowest level in two years. The Thomson Reuters/University of Michigan final index of consumer confidence in August slipped to its lowest level since November 2008.
Consumer spending rose in July
U.S. consumers spent more than expected in July, on the basis of a report from the U.S. Department of Commerce, which showed that consumer spending rose 0.8%, the largest gain in five months. Income rose 0.3%, and the savings rate slowed to 5.0% from 5.5% in June, a trend that suggests a rise in confidence about the economy.
Eurozone confidence fades
Economic confidence among Eurozone businesses and consumers fell in August. The Economic Sentiment Indicator declined for the sixth-straight month, to 98.3 in August from 103.0 in July, the European Commission reported. It was the weakest reading since March 2010 and far below the 100.5 expected by economists. The consumer confidence index slid to -16.5 from -11.2, its largest one-month decline since 1990. In a separate report, Eurostat, the European Union statistics office, reported that inflation remained at 2.5% in August and unemployment stood unchanged at 10.0% in July.
Global manufacturing activity slumps
Manufacturing activity slumped across much of the world in August, according to various reports. Manufacturing in the Eurozone contracted, U.K. factory activity hit a two-year low, and a Chinese manufacturing index straddled the line between expansion and contraction, at 50.9, just above its 29-month low recorded in July. South Korea’s purchasing managers' index fell into negative territory, to 49.7 from 51.3 in July.
German economic resilience a positive sign for Europe
Bullish reports from Germany indicate that Europe’s largest and strongest economy continues to grow. Unemployment remained at its lowest level in two decades in August as unemployment fell for the twenty-sixth consecutive month. The unemployment rate remained at 7%, its lowest level since German reunification in 1991. Machine orders grew 9% in July from a year earlier.
Canadian economy shrinks
Canada’s economic output shrank unexpectedly in the second quarter, its first contraction in two years. Canada depends heavily on international trade and has been hurt by the U.S. and European economic slowdown. Canadian GDP declined 0.1% in the second quarter, for an annualized 0.4% contraction. Among the G-7 nations, only Japan and Canada had a contraction in economic activity in the second quarter.
U.S. and global corporate news
U.S. auto sales rise
Sales rose in August for U.S. car manufacturers. Chrysler Group reported a 31% jump in sales, while General Motors and Nissan Motor each reported close to a 20% increase and Ford Motor had an 11% gain. Because of a slow recovery in production after the March tsunami, Japan’s Honda Motor and Toyota Motor reported decreases in U.S. sales of 24.3% and 12.7%, respectively.
U.S. Justice Department a hard sell on merger
The U.S. Department of Justice filed an antitrust lawsuit to block a proposed $39-billion merger between AT&T and T-Mobile USA, saying that it would substantially decrease competition, lead to higher prices, and reduce product innovation.
Bombardier profit soars Canada’s transportation giant Bombardier posted a 53% jump in second-quarter profit as revenue grew in both its aerospace and transportation divisions.
Globally, manufacturing activity appears to be sluggish, with Chinese and U.K. manufacturing activity dropping to multi-year lows. However, Germany’s economy continued to shine in contrast to many neighboring European countries, with bullish news on manufacturing and jobs.
The week began with some relief that the worst fears regarding Hurricane Irene had failed to materialize. The storm blew through Manhattan with little disruption to stock market operations. However, millions of households were affected throughout the eastern United States, a development that could at least temporarily weigh down economic activity.
U.S. and global economic news
U.S. job growth fizzles
U.S. employment stagnated in August, with no job growth, according to the monthly nonfarm payroll report released by the Labor Department Friday morning. It was the first time in 11 months there was no net increase in U.S. jobs. The disappointing news, however, was influenced by the 45,000 Verizon workers who were out of work because they were on strike at the time the report was compiled. Still, the report's employment picture fell far short of the 60,000- to 65,000-job gain that had been anticipated by economists, and the U.S. unemployment rate remained at 9.1%.
More significantly, the weak showing reflected a lack of confidence among U.S. employers following the debt-ceiling showdown in Washington, the S&P downgrade of U.S. debt, the plummeting stock market, and ongoing concerns about Europe’s sovereign debt crisis. While the report conveyed a flat employment picture, it did indicate an increase of 17,000 jobs in the private sector.
ADP reports 91,000 more private sector jobs
Private businesses added 91,000 jobs in August, on a seasonally adjusted basis, according to a report released by payroll giant Automatic Data Processing (ADP) and Macroeconomic Advisers, a consultancy. Almost all the hiring occurred at small businesses (a gain of 58,000) and medium-size businesses (30,000 new jobs). Businesses with 500 or more employees added only 3,000 jobs.
U.S. manufacturing growth stays surprisingly strong
U.S. manufacturing activity grew slightly in August, according to the Institute for Supply Management’s factory index, which fell slightly to 50.6 from 50.9 in July. Economists had expected a drop to 48.5.
Weekly jobless claims ease slightly in United States
Initial claims for unemployment benefits by U.S. workers fell by 12,000 to a seasonally adjusted 409,000 in the week ended August 27, according to the Labor Department. However, the four-week moving average of new claims rose by 1,750 to 410,250.
Consumer confidence indices slip
U.S. consumers lost confidence in August, according to several confidence gauges. The Conference Board’s index of consumer confidence dropped to 44.5 from 59.2 in July, its lowest reading since April 2009. The survey also showed that consumers expect inflation to rise to 5.8% in the next 12 months. Bloomberg’s Consumer Confidence Index fell to -49.1 from -47.0 in July, its second lowest level in two years. The Thomson Reuters/University of Michigan final index of consumer confidence in August slipped to its lowest level since November 2008.
Consumer spending rose in July
U.S. consumers spent more than expected in July, on the basis of a report from the U.S. Department of Commerce, which showed that consumer spending rose 0.8%, the largest gain in five months. Income rose 0.3%, and the savings rate slowed to 5.0% from 5.5% in June, a trend that suggests a rise in confidence about the economy.
Eurozone confidence fades
Economic confidence among Eurozone businesses and consumers fell in August. The Economic Sentiment Indicator declined for the sixth-straight month, to 98.3 in August from 103.0 in July, the European Commission reported. It was the weakest reading since March 2010 and far below the 100.5 expected by economists. The consumer confidence index slid to -16.5 from -11.2, its largest one-month decline since 1990. In a separate report, Eurostat, the European Union statistics office, reported that inflation remained at 2.5% in August and unemployment stood unchanged at 10.0% in July.
Global manufacturing activity slumps
Manufacturing activity slumped across much of the world in August, according to various reports. Manufacturing in the Eurozone contracted, U.K. factory activity hit a two-year low, and a Chinese manufacturing index straddled the line between expansion and contraction, at 50.9, just above its 29-month low recorded in July. South Korea’s purchasing managers' index fell into negative territory, to 49.7 from 51.3 in July.
German economic resilience a positive sign for Europe
Bullish reports from Germany indicate that Europe’s largest and strongest economy continues to grow. Unemployment remained at its lowest level in two decades in August as unemployment fell for the twenty-sixth consecutive month. The unemployment rate remained at 7%, its lowest level since German reunification in 1991. Machine orders grew 9% in July from a year earlier.
Canadian economy shrinks
Canada’s economic output shrank unexpectedly in the second quarter, its first contraction in two years. Canada depends heavily on international trade and has been hurt by the U.S. and European economic slowdown. Canadian GDP declined 0.1% in the second quarter, for an annualized 0.4% contraction. Among the G-7 nations, only Japan and Canada had a contraction in economic activity in the second quarter.
U.S. and global corporate news
U.S. auto sales rise
Sales rose in August for U.S. car manufacturers. Chrysler Group reported a 31% jump in sales, while General Motors and Nissan Motor each reported close to a 20% increase and Ford Motor had an 11% gain. Because of a slow recovery in production after the March tsunami, Japan’s Honda Motor and Toyota Motor reported decreases in U.S. sales of 24.3% and 12.7%, respectively.
U.S. Justice Department a hard sell on merger
The U.S. Department of Justice filed an antitrust lawsuit to block a proposed $39-billion merger between AT&T and T-Mobile USA, saying that it would substantially decrease competition, lead to higher prices, and reduce product innovation.
Bombardier profit soars Canada’s transportation giant Bombardier posted a 53% jump in second-quarter profit as revenue grew in both its aerospace and transportation divisions.
Friday, August 26, 2011
U.S. economic news for the week ended August 26, 2011
U.S. and global economic news
Bernanke makes no promises about aid to economy
In a much-anticipated speech, U.S. Federal Reserve Board Chairman Ben Bernanke said the Fed is ready to provide more support to the economy, but he did not indicate that a move was imminent. Throughout the week, investors had pushed stocks higher on the hopes that Bernanke, in remarks delivered Friday to global monetary policymakers in Jackson Hole, Wyoming, would announce a third round of quantitative easing. At the same meeting last year, Bernanke's promise to stimulate the economy through U.S. Treasury purchases sparked an eight-month rally in the equity market.
U.S. economy grows less than expected
U.S. gross domestic product rose at a 1% annual rate in the second quarter. The gain was less than expected, and the report, released by the U.S. Department of Commerce, showed that consumer spending grew at a 0.4% annual rate, the smallest gain in more than a year. On a more positive note, corporate profits grew, and wages and salaries were revised upward at the start of the year to show the biggest gain in more than four years.
Moody's downgrades Japan
Moody's Investors Service downgraded Japan's debt rating by one notch, citing concerns over the government's ability to reduce its debt and implement long-term sustainability measures. The rating now stands at Aa3, three levels below Aaa. Moody's added that the outlook is stable and that there is little chance the country would experience a crisis in its debt market anytime soon. However, the rating agency said the frequent change in political leadership is a key factor impeding the implementation of the fiscal measures necessary to reduce the debt.
New home sales fall more than expected
Sales of new U.S. homes fell more than expected in July, to the lowest level in five months. The medium sales price of a new home increased 4.7% from July 2010, to $222,000. Last week, mortgage applications for purchases fell 2.4%, to a nearly 15-year low, amid increased fears over the economy.
Weekly U.S. jobless claims rise
U.S. jobless claims unexpectedly rose last week, climbing by 5,000 to 417,000. The numbers were pushed higher by the labor dispute at Verizon Communications. At least 8,500 applications were filed by workers at Verizon last week, compared with the 12,500 filed in the previous week, according to the Commerce Department.
U.S. durable goods orders rise more than expected
U.S. durable goods orders rose 4% in July, more than expected and the most in four months. Rising demand for aircraft and autos made up for a decrease in business equipment, whose orders fell 1.3% in June. Orders excluding the volatile transportation category rose 0.7%.
German economy shows more signs of faltering
A sharper-than-expected drop in Germany's Ifo business confidence survey added to evidence that the German economic recovery is faltering. The index fell to 108.7 from 112.9. Investors' confidence also fell more than expected in August, to its lowest level in more than two-and-a-half years, as fears mounted that Europe's debt crisis will curb growth. Likewise, eurozone growth remained at a two-year low in August. On an annualized basis, eurozone gross domestic product rose 0.7% in the second quarter. The ZEW Center for European Economic Research said its index of investor and analyst expectations, which tries to predict developments six months in advance, fell to -37.6 from -15.0 in July. That is the lowest level since December 2008 and the largest drop since July 2006.
Japan announces moves to curb yen's rise
In an effort to help its export-dependent manufacturing base, the Japanese government announced a package of incentives and regulations aimed at curbing the surge of the yen. The announcement had little effect on the Japanese currency, which has been bought by investors as a safe haven amid worries about U.S. and eurozone finances. The package comprises a $100 billion fund to encourage Japanese businesses to increase acquisitions of companies outside Japan and a rule requiring major financial institutions to report currency trading positions twice daily.
China's manufacturing activity declines
HSBC reported that its China Manufacturing Purchasing Managers Index showed a decline in manufacturing activity for the second month in a row.
U.S. and global corporate news
Buffett to invest $5 billion in Bank of America
Warren Buffett will invest $5 billion in Bank of America in an effort to shore up the company. Bank of America's shares rose 15% after the announcement. Buffett's move follows similar efforts to help prop up Goldman Sachs and General Electric during the 2008 financial crisis. Bank of America's stock has suffered as investors, fearing that the bank is still burdened by billions of dollars in problem mortgages, dumped the stock. The cost of insuring BofA's bonds against default surged to a record this week amid investor concern over the bank's creditworthiness.
Jobs announces resignation
Technology stocks fell after Apple's Steve Jobs announced his resignation as chief executive officer. Jobs, who has been on medical leave since January, will remain with the company as chairman. Tim Cook, formerly chief operating officer, was named CEO.
UBS and ABN Amro announce job cuts
UBS announced plans to lay off more than 5% of its work force, mainly in its investment banking division. The move, which will eliminate 3,500 jobs, is part of a plan to save two billion Swiss francs annually and comes as the bank experiences weaker earnings, tighter regulation, and a rise in the Swiss franc. ABN Amro Bank also announced this week that it will cut an additional 2,350 jobs in the coming years in an effort to cuts costs as it prepares for privatization.
BHP posts record profit
BHP Billiton, the world's largest mining company, posted record full-year profits but cautioned about the future amid rising costs. BHP benefited from strong prices for iron ore and other commodities. The company's net profit rose 86%, to $23.65 billion in the year ended June 30, a record for an Australian company.
Toll Brothers profits jump 54%
Luxury homebuilder Toll Brothers reports its fiscal third-quarter earnings jumped 54% after getting a boost from a larger tax benefit. However, the company said it expects revenues to fall by double digits as home deliveries fall.
Bernanke makes no promises about aid to economy
In a much-anticipated speech, U.S. Federal Reserve Board Chairman Ben Bernanke said the Fed is ready to provide more support to the economy, but he did not indicate that a move was imminent. Throughout the week, investors had pushed stocks higher on the hopes that Bernanke, in remarks delivered Friday to global monetary policymakers in Jackson Hole, Wyoming, would announce a third round of quantitative easing. At the same meeting last year, Bernanke's promise to stimulate the economy through U.S. Treasury purchases sparked an eight-month rally in the equity market.
U.S. economy grows less than expected
U.S. gross domestic product rose at a 1% annual rate in the second quarter. The gain was less than expected, and the report, released by the U.S. Department of Commerce, showed that consumer spending grew at a 0.4% annual rate, the smallest gain in more than a year. On a more positive note, corporate profits grew, and wages and salaries were revised upward at the start of the year to show the biggest gain in more than four years.
Moody's downgrades Japan
Moody's Investors Service downgraded Japan's debt rating by one notch, citing concerns over the government's ability to reduce its debt and implement long-term sustainability measures. The rating now stands at Aa3, three levels below Aaa. Moody's added that the outlook is stable and that there is little chance the country would experience a crisis in its debt market anytime soon. However, the rating agency said the frequent change in political leadership is a key factor impeding the implementation of the fiscal measures necessary to reduce the debt.
New home sales fall more than expected
Sales of new U.S. homes fell more than expected in July, to the lowest level in five months. The medium sales price of a new home increased 4.7% from July 2010, to $222,000. Last week, mortgage applications for purchases fell 2.4%, to a nearly 15-year low, amid increased fears over the economy.
Weekly U.S. jobless claims rise
U.S. jobless claims unexpectedly rose last week, climbing by 5,000 to 417,000. The numbers were pushed higher by the labor dispute at Verizon Communications. At least 8,500 applications were filed by workers at Verizon last week, compared with the 12,500 filed in the previous week, according to the Commerce Department.
U.S. durable goods orders rise more than expected
U.S. durable goods orders rose 4% in July, more than expected and the most in four months. Rising demand for aircraft and autos made up for a decrease in business equipment, whose orders fell 1.3% in June. Orders excluding the volatile transportation category rose 0.7%.
German economy shows more signs of faltering
A sharper-than-expected drop in Germany's Ifo business confidence survey added to evidence that the German economic recovery is faltering. The index fell to 108.7 from 112.9. Investors' confidence also fell more than expected in August, to its lowest level in more than two-and-a-half years, as fears mounted that Europe's debt crisis will curb growth. Likewise, eurozone growth remained at a two-year low in August. On an annualized basis, eurozone gross domestic product rose 0.7% in the second quarter. The ZEW Center for European Economic Research said its index of investor and analyst expectations, which tries to predict developments six months in advance, fell to -37.6 from -15.0 in July. That is the lowest level since December 2008 and the largest drop since July 2006.
Japan announces moves to curb yen's rise
In an effort to help its export-dependent manufacturing base, the Japanese government announced a package of incentives and regulations aimed at curbing the surge of the yen. The announcement had little effect on the Japanese currency, which has been bought by investors as a safe haven amid worries about U.S. and eurozone finances. The package comprises a $100 billion fund to encourage Japanese businesses to increase acquisitions of companies outside Japan and a rule requiring major financial institutions to report currency trading positions twice daily.
China's manufacturing activity declines
HSBC reported that its China Manufacturing Purchasing Managers Index showed a decline in manufacturing activity for the second month in a row.
U.S. and global corporate news
Buffett to invest $5 billion in Bank of America
Warren Buffett will invest $5 billion in Bank of America in an effort to shore up the company. Bank of America's shares rose 15% after the announcement. Buffett's move follows similar efforts to help prop up Goldman Sachs and General Electric during the 2008 financial crisis. Bank of America's stock has suffered as investors, fearing that the bank is still burdened by billions of dollars in problem mortgages, dumped the stock. The cost of insuring BofA's bonds against default surged to a record this week amid investor concern over the bank's creditworthiness.
Jobs announces resignation
Technology stocks fell after Apple's Steve Jobs announced his resignation as chief executive officer. Jobs, who has been on medical leave since January, will remain with the company as chairman. Tim Cook, formerly chief operating officer, was named CEO.
UBS and ABN Amro announce job cuts
UBS announced plans to lay off more than 5% of its work force, mainly in its investment banking division. The move, which will eliminate 3,500 jobs, is part of a plan to save two billion Swiss francs annually and comes as the bank experiences weaker earnings, tighter regulation, and a rise in the Swiss franc. ABN Amro Bank also announced this week that it will cut an additional 2,350 jobs in the coming years in an effort to cuts costs as it prepares for privatization.
BHP posts record profit
BHP Billiton, the world's largest mining company, posted record full-year profits but cautioned about the future amid rising costs. BHP benefited from strong prices for iron ore and other commodities. The company's net profit rose 86%, to $23.65 billion in the year ended June 30, a record for an Australian company.
Toll Brothers profits jump 54%
Luxury homebuilder Toll Brothers reports its fiscal third-quarter earnings jumped 54% after getting a boost from a larger tax benefit. However, the company said it expects revenues to fall by double digits as home deliveries fall.
Saturday, August 20, 2011
U.S. economic news for the week ended August 19, 2011
U.S. and global economic news
Global stocks dropped sharply this week amid concern that the U.S. economic recovery is faltering and Europe's debt crisis will worsen. Investors turned cautious after German and French leaders failed to come up with concrete proposals to address sovereign debt problems in the region. A spate of negative U.S. news, reports that European banks lack sufficient capital, and downgrades of the U.S. and global economy by three U.S. banks sent the market careening lower throughout much of the week.
Gold prices, benefitting from safe-haven flows, jumped well about $1800 per ounce, and U.S. Treasuries surged, with the yield on the 10-year note falling below 2% for the first time in 50 years. Canadian and British debt of similar maturities also hit record lows. Amid fears of a slowing global economy, crude prices dropped below $84. This month alone, global equities markets have lost more than $6 trillion of their value.
U.S. and global economic news
Worries mount that Europe's banks lack sufficient capital
Speculation that European banks lack sufficient capital further unnerved investors this week. Worries about the health of the bank system mounted after the European Central Bank announced that a lender will borrow dollars for the first time in six months, and The Wall Street Journal reported that regulators were scrutinizing the U.S. operations of Europe's largest lenders to assess their vulnerability.
Swiss National Bank moves to weaken its currency
The Swiss National Bank (SNB) made yet another effort this week to weaken its currency, the franc (CHF), which has been driven higher as investors seek refuge from the eurozone debt crisis and fiscal worries in the United States. The bank nearly doubled the amount of liquidity available to the money market to CHF200 billion from CHF120 billion, but stopped short of announcing tougher moves, such as adopting a currency target or pegging the currency to the euro. The SNB said it would also continue to repurchase outstanding SNB bills and use foreign-exchange swap transitions. The move was the third effort n the last several weeks to weaken the franc by flooding the market with liquidity.
Fitch confirms U.S. top credit rating
Fitch Ratings confirmed the United States' top-notch credit rating and gave a vote of confidence to Washington's deficit reduction efforts. Fitch also maintained its stable outlook on its U.S. rating. This affirmation comes two weeks after Standard & Poor's downgraded the United States to AA+ with a negative outlook. Fitch did threaten to add a negative outlook to its rating if U.S. lawmakers fail to implement the $2.1 trillion in savings that were agreed to earlier this month or if the economy deteriorates significantly.
German growth slows sharply
News that Germany's economic growth slowed sharply in the second quarter of 2011 roiled markets and called into question the European Central Bank's decision to raise interest rates. The country's gross domestic product rose 0.1% in the second quarter from the first, and by 2.7% in annual terms. The German numbers, together with last week's data that showed flat growth in France, raised concern about the health of core European countries. The German report showed that net exports, private consumption, and construction activity weighed on growth in the second quarter.
U.S. economic news shows more weakness
While U.S. economic data were mixed this week, investors largely focused on the negative. In another sign of a persistently weak U.S. labor market, jobless claims rose more than expected by 9,000 to 408,000, in the week ended August 13. A Philadelphia-area manufacturing report took on added significance amid the economic jitters after it showed that area manufacturing shrank in August by the most since 2009. The U.S. Department of Commerce Department reported that housing starts dropped 1.5% in July. On the flip side, in July, industrial production in the United States climbed 09%, the most in a year, as carmakers began to shake off the effect of the disaster in Japan and as temperatures boosted utility use.
U.S. banks cut global and U.S. growth forecasts
Morgan Stanley cut its forecast for global economic growth this year to 3.9% from 4.2%, citing and insufficient policy response to Europe's debt crisis and weakening confidence. Morgan Stanley also cuts its 2012 GDP growth forecast to 0.5% from a previous estimate of 1.2%. Citigroup, citing "political paralysis" and fiscal tightening steps cut its 2011 U.S. growth forecast to 1.6% from 1.7%, and JPMorgan, noting that the risks of recession are "clearly elevated," said it now expects growth in the fourth quarter of 1%, rather than the 2.5%, previously forecast, and 0.5% in the first quarter of 2012, instead of 1.5%
U.S. consumer and wholesale costs rise more than expected
Consumer and wholesale costs in the United States rose more than expected in July. Consumer prices rose 0.5% from June, and the core rate, which excludes volatile food and energy costs, rose by a monthly 0.2%. On an annualized basis consumer prices were up 3.6% in July, above the U.S. Federal Reserve Board's inflation target. Wholesale prices rose 0.2%, led by higher prices for tobacco, trucks, and pharmaceuticals. The report, released by the U.S. Department of Labor, showed that the cost of crude products dropped in July for the third month in a row, led by declines in prices of food and petroleum. However, it suggests that falling commodity prices have yet to show up in consumer prices. The core measure however, which excludes volatile food and energy, rose 0.4%, the most since January. Compared with July 2010, companies paid 7.2% more for good last month, while core prices climbed 2.5% in the 12-month period.
U.S. and global corporate news
Google buys Motorola Mobility
Google, the largest maker of smart phone software, agreed to buy Motorola Mobility for $12.5 billion in cash. The deal ups Google's rivalry with Apple and gives it more control over wireless patents while expanding its hardware business.
Target and Staples report strong profits
Target, the second-largest discount U.S. retailer reported that it s profit jumped 3.7% in the second-quarter on higher sales. Staples, the biggest office supply retailer, forecast earnings that topped analysts' expectations. The company also reported that its fiscal second-quarter earnings rose 35% as its business units showed progress even as office suppliers struggle overall.
Hewlett-Packard falls short of expectations
Hewlett-Packard forecast fiscal fourth-quarter and full-year earnings that missed analysts' expectations as dull consumer spending failed to offset corporate purchases of printers, computers and servers.
Global stocks dropped sharply this week amid concern that the U.S. economic recovery is faltering and Europe's debt crisis will worsen. Investors turned cautious after German and French leaders failed to come up with concrete proposals to address sovereign debt problems in the region. A spate of negative U.S. news, reports that European banks lack sufficient capital, and downgrades of the U.S. and global economy by three U.S. banks sent the market careening lower throughout much of the week.
Gold prices, benefitting from safe-haven flows, jumped well about $1800 per ounce, and U.S. Treasuries surged, with the yield on the 10-year note falling below 2% for the first time in 50 years. Canadian and British debt of similar maturities also hit record lows. Amid fears of a slowing global economy, crude prices dropped below $84. This month alone, global equities markets have lost more than $6 trillion of their value.
U.S. and global economic news
Worries mount that Europe's banks lack sufficient capital
Speculation that European banks lack sufficient capital further unnerved investors this week. Worries about the health of the bank system mounted after the European Central Bank announced that a lender will borrow dollars for the first time in six months, and The Wall Street Journal reported that regulators were scrutinizing the U.S. operations of Europe's largest lenders to assess their vulnerability.
Swiss National Bank moves to weaken its currency
The Swiss National Bank (SNB) made yet another effort this week to weaken its currency, the franc (CHF), which has been driven higher as investors seek refuge from the eurozone debt crisis and fiscal worries in the United States. The bank nearly doubled the amount of liquidity available to the money market to CHF200 billion from CHF120 billion, but stopped short of announcing tougher moves, such as adopting a currency target or pegging the currency to the euro. The SNB said it would also continue to repurchase outstanding SNB bills and use foreign-exchange swap transitions. The move was the third effort n the last several weeks to weaken the franc by flooding the market with liquidity.
Fitch confirms U.S. top credit rating
Fitch Ratings confirmed the United States' top-notch credit rating and gave a vote of confidence to Washington's deficit reduction efforts. Fitch also maintained its stable outlook on its U.S. rating. This affirmation comes two weeks after Standard & Poor's downgraded the United States to AA+ with a negative outlook. Fitch did threaten to add a negative outlook to its rating if U.S. lawmakers fail to implement the $2.1 trillion in savings that were agreed to earlier this month or if the economy deteriorates significantly.
German growth slows sharply
News that Germany's economic growth slowed sharply in the second quarter of 2011 roiled markets and called into question the European Central Bank's decision to raise interest rates. The country's gross domestic product rose 0.1% in the second quarter from the first, and by 2.7% in annual terms. The German numbers, together with last week's data that showed flat growth in France, raised concern about the health of core European countries. The German report showed that net exports, private consumption, and construction activity weighed on growth in the second quarter.
U.S. economic news shows more weakness
While U.S. economic data were mixed this week, investors largely focused on the negative. In another sign of a persistently weak U.S. labor market, jobless claims rose more than expected by 9,000 to 408,000, in the week ended August 13. A Philadelphia-area manufacturing report took on added significance amid the economic jitters after it showed that area manufacturing shrank in August by the most since 2009. The U.S. Department of Commerce Department reported that housing starts dropped 1.5% in July. On the flip side, in July, industrial production in the United States climbed 09%, the most in a year, as carmakers began to shake off the effect of the disaster in Japan and as temperatures boosted utility use.
U.S. banks cut global and U.S. growth forecasts
Morgan Stanley cut its forecast for global economic growth this year to 3.9% from 4.2%, citing and insufficient policy response to Europe's debt crisis and weakening confidence. Morgan Stanley also cuts its 2012 GDP growth forecast to 0.5% from a previous estimate of 1.2%. Citigroup, citing "political paralysis" and fiscal tightening steps cut its 2011 U.S. growth forecast to 1.6% from 1.7%, and JPMorgan, noting that the risks of recession are "clearly elevated," said it now expects growth in the fourth quarter of 1%, rather than the 2.5%, previously forecast, and 0.5% in the first quarter of 2012, instead of 1.5%
U.S. consumer and wholesale costs rise more than expected
Consumer and wholesale costs in the United States rose more than expected in July. Consumer prices rose 0.5% from June, and the core rate, which excludes volatile food and energy costs, rose by a monthly 0.2%. On an annualized basis consumer prices were up 3.6% in July, above the U.S. Federal Reserve Board's inflation target. Wholesale prices rose 0.2%, led by higher prices for tobacco, trucks, and pharmaceuticals. The report, released by the U.S. Department of Labor, showed that the cost of crude products dropped in July for the third month in a row, led by declines in prices of food and petroleum. However, it suggests that falling commodity prices have yet to show up in consumer prices. The core measure however, which excludes volatile food and energy, rose 0.4%, the most since January. Compared with July 2010, companies paid 7.2% more for good last month, while core prices climbed 2.5% in the 12-month period.
U.S. and global corporate news
Google buys Motorola Mobility
Google, the largest maker of smart phone software, agreed to buy Motorola Mobility for $12.5 billion in cash. The deal ups Google's rivalry with Apple and gives it more control over wireless patents while expanding its hardware business.
Target and Staples report strong profits
Target, the second-largest discount U.S. retailer reported that it s profit jumped 3.7% in the second-quarter on higher sales. Staples, the biggest office supply retailer, forecast earnings that topped analysts' expectations. The company also reported that its fiscal second-quarter earnings rose 35% as its business units showed progress even as office suppliers struggle overall.
Hewlett-Packard falls short of expectations
Hewlett-Packard forecast fiscal fourth-quarter and full-year earnings that missed analysts' expectations as dull consumer spending failed to offset corporate purchases of printers, computers and servers.
Friday, August 12, 2011
U.S. economic news for the week ended August 12, 2011
Following a controversial downgrading of U.S. debt by ratings agency Standard & Poor’s late Friday, August 5, investors sent stock prices tumbling and gold prices soaring Monday. That set off a turbulent week of extreme financial market volatility around the world. Jittery nerves swept through Asia and Europe and back to the Americas, as fears grew regarding the escalating European debt crisis and a global economic slowdown. The stock selloff put more than half of the countries in the MSCI All-Country World Index in bear-market territory, with losses of 20%-plus since recent highs.
An attempt by U.S. President Obama to calm investors on Monday fell flat, as U.S. stock indices gave up more than 5%. The U.S. Federal Reserve Board’s pledge Tuesday to hold interest rates low until mid-2013 temporarily calmed markets. However, all of Tuesday's stock market gains were erased on Wednesday, as investors focused on the Fed's projection of two years of slow growth, which was why the Fed had made its low-rate pledge. The Chicago Board of Options Exchange (CBOE) Volatility Index reached 48 on Monday, and the major stock indices gained or lost 4% or more daily for four consecutive days, a level of volatility not seen since the fall of 2008. CBOE Volatility Index values greater than 30 are generally associated with a large amount of volatility as a result of investor fear or uncertainty. Optimism returned Thursday, on Cisco Systems’ positive earnings report and a drop in weekly U.S. jobless claims. Thursday marked the seventh straight day in which the Dow Jones Industrial Average reversed its previous day’s direction. The volatility has been magnified by leveraged exchange-traded funds that add to the market’s movements each day.
Through all this, despite the debt downgrade, U.S. Treasuries ironically retained their status as safe-haven investments, as investors lacked confidence in other alternatives amid so much uncertainty and volatility. Gold futures contracts set a record of $1,817 per ounce during the week. However, accounting for inflation, gold would have to reach $2,400 per ounce to equal its previous record high. As projections of future economic growth faded, the price of a barrel of oil fell to just above $80 Wednesday, before rebounding to $86 by Friday.
U.S. and global economic news
European debt concerns grow; ECB buys more bonds
On Monday and again Tuesday, the European Central Bank bought Italian and Spanish government bonds to stabilize borrowing costs for the European Union’s third- and fourth-largest economies in a critical and dramatic move to stem Europe’s growing debt crisis. The ECB’s bond purchase program had been inactive for four months before the central bank resumed purchases of Portuguese and Irish bonds last week.
Eurozone production slips
Eurozone industrial production shrank 0.7% from May to June, the European Union’s statistics office reported. France’s economy had no growth in the second quarter, while Greece’s economic output contracted 6.9% from a year earlier.
U.S. Treasuries continue to serve as safe haven
Despite the downgrade of U.S. sovereign debt from AAA to AA+ by Standard & Poor’s, demand for U.S. Treasury securities remained very high this week. Yields, moving in the opposite direction to bond prices, fell to 2.10% for the 10-year Treasury note on Wednesday and just 0.17% for the two-year note. Yields rose slightly by Friday – to 2.25% and 0.19%, respectively – as a more optimistic mood settled the market somewhat. Few alternatives exist to U.S. Treasuries, given their depth and liquidity, with more than $9.3 trillion in debt outstanding.
U.S. consumer confidence plummets
Confidence among U.S. consumers fell in August to its lowest point since May 1980. The Thomson Reuters/University of Michigan preliminary index of consumer sentiment plunged to 54.9 from 63.7 in July. A decline to 62 was expected in a Bloomberg News survey. Rising pessimism after the downgrade of U.S. debt and the current stock market volatility could weigh down consumer spending.
Gold benefits from heightened unease
Gold lived up to its reputation as an investment to hold amid uncertainty and volatility. The price of an ounce of gold in a forward contract rose to $1,817 on Wednesday before dipping below $1,800 Thursday.
U.S. retail sales rise
Retail and food services sales were 0.5% higher in the United States in July from June, as consumers spent more on gasoline, electronics, and other merchandise.
U.S. productivity weakened in second quarter
U.S. worker productivity fell for the second consecutive quarter, as employee output per hour declined at an annual rate of 0.3% in the second quarter of 2011 after falling 0.6% the previous three months. Declining efficiency and rising costs are disincentives for companies to hire more staff or increase pay.
Jobless claims ease
Initial claims for unemployment benefits by U.S. workers fell by 7,000 to a seasonally adjusted 395,000 in the week ended August 6, according to the U.S. Department of Labor. The four-week moving average of new claims fell by 3,250 to 405,000.
German exports drop
German exports declined in June, in another sign of economic weakness in Europe. Exports from Germany fell 1.2% from May while imports rose 0.3%. Demand for German-produced goods eased as neighboring countries sought to reduce spending because of the sovereign debt crisis and the demand for fiscal restraint.
U.S. and global corporate news
Commerzbank hurt by Greek debt exposure
Commerzbank, Germany’s second-largest bank, had a 93% drop in its net profit in the second quarter from the year-earlier period after writing down all of its Greek sovereign debt exposure. Operating profit fell 77%. However, Commerzbank said its core bank is on track for a 2011 operating profit higher than last year’s 1.98 billion euros.
McDonald’s same-store sales up 5.1%
Same-store sales at McDonald’s restaurants rose 5.1% in July, as the fast-food giant’s sales grew in all regions. McDonald’s continues to benefit from competitive pricing and an increasingly diverse menu. The company’s system-wide sales grew 14% in July.
Macy’s, Polo, Kohl’s profits up, Penney flat
Department store chain Macy’s increased its earnings 64% in the second quarter from a year earlier. Same-store sales grew 6.4% while online sales were up 40%. Polo Ralph Lauren posted a 52% rise in first-quarter earnings and projects revenue growth in the high teens to low-20% range. Kohl’s reported a 17% increase in profits, but sales were up less than 4%, below analysts’ expectations. JCPenney had flat profits and lower sales, reflecting its departure from its catalog business.
Cisco Systems
Networking equipment maker Cisco Systems had a 36% drop in net income in its fiscal fourth quarter as a result of a $772 million restructuring charge. Its revenue rose 3.3% from the year-earlier period, higher than analyst expectations, and the firm’s CEO, John Chambers, said Cisco was making solid progress on turning its fortunes around.
An attempt by U.S. President Obama to calm investors on Monday fell flat, as U.S. stock indices gave up more than 5%. The U.S. Federal Reserve Board’s pledge Tuesday to hold interest rates low until mid-2013 temporarily calmed markets. However, all of Tuesday's stock market gains were erased on Wednesday, as investors focused on the Fed's projection of two years of slow growth, which was why the Fed had made its low-rate pledge. The Chicago Board of Options Exchange (CBOE) Volatility Index reached 48 on Monday, and the major stock indices gained or lost 4% or more daily for four consecutive days, a level of volatility not seen since the fall of 2008. CBOE Volatility Index values greater than 30 are generally associated with a large amount of volatility as a result of investor fear or uncertainty. Optimism returned Thursday, on Cisco Systems’ positive earnings report and a drop in weekly U.S. jobless claims. Thursday marked the seventh straight day in which the Dow Jones Industrial Average reversed its previous day’s direction. The volatility has been magnified by leveraged exchange-traded funds that add to the market’s movements each day.
Through all this, despite the debt downgrade, U.S. Treasuries ironically retained their status as safe-haven investments, as investors lacked confidence in other alternatives amid so much uncertainty and volatility. Gold futures contracts set a record of $1,817 per ounce during the week. However, accounting for inflation, gold would have to reach $2,400 per ounce to equal its previous record high. As projections of future economic growth faded, the price of a barrel of oil fell to just above $80 Wednesday, before rebounding to $86 by Friday.
U.S. and global economic news
European debt concerns grow; ECB buys more bonds
On Monday and again Tuesday, the European Central Bank bought Italian and Spanish government bonds to stabilize borrowing costs for the European Union’s third- and fourth-largest economies in a critical and dramatic move to stem Europe’s growing debt crisis. The ECB’s bond purchase program had been inactive for four months before the central bank resumed purchases of Portuguese and Irish bonds last week.
Eurozone production slips
Eurozone industrial production shrank 0.7% from May to June, the European Union’s statistics office reported. France’s economy had no growth in the second quarter, while Greece’s economic output contracted 6.9% from a year earlier.
U.S. Treasuries continue to serve as safe haven
Despite the downgrade of U.S. sovereign debt from AAA to AA+ by Standard & Poor’s, demand for U.S. Treasury securities remained very high this week. Yields, moving in the opposite direction to bond prices, fell to 2.10% for the 10-year Treasury note on Wednesday and just 0.17% for the two-year note. Yields rose slightly by Friday – to 2.25% and 0.19%, respectively – as a more optimistic mood settled the market somewhat. Few alternatives exist to U.S. Treasuries, given their depth and liquidity, with more than $9.3 trillion in debt outstanding.
U.S. consumer confidence plummets
Confidence among U.S. consumers fell in August to its lowest point since May 1980. The Thomson Reuters/University of Michigan preliminary index of consumer sentiment plunged to 54.9 from 63.7 in July. A decline to 62 was expected in a Bloomberg News survey. Rising pessimism after the downgrade of U.S. debt and the current stock market volatility could weigh down consumer spending.
Gold benefits from heightened unease
Gold lived up to its reputation as an investment to hold amid uncertainty and volatility. The price of an ounce of gold in a forward contract rose to $1,817 on Wednesday before dipping below $1,800 Thursday.
U.S. retail sales rise
Retail and food services sales were 0.5% higher in the United States in July from June, as consumers spent more on gasoline, electronics, and other merchandise.
U.S. productivity weakened in second quarter
U.S. worker productivity fell for the second consecutive quarter, as employee output per hour declined at an annual rate of 0.3% in the second quarter of 2011 after falling 0.6% the previous three months. Declining efficiency and rising costs are disincentives for companies to hire more staff or increase pay.
Jobless claims ease
Initial claims for unemployment benefits by U.S. workers fell by 7,000 to a seasonally adjusted 395,000 in the week ended August 6, according to the U.S. Department of Labor. The four-week moving average of new claims fell by 3,250 to 405,000.
German exports drop
German exports declined in June, in another sign of economic weakness in Europe. Exports from Germany fell 1.2% from May while imports rose 0.3%. Demand for German-produced goods eased as neighboring countries sought to reduce spending because of the sovereign debt crisis and the demand for fiscal restraint.
U.S. and global corporate news
Commerzbank hurt by Greek debt exposure
Commerzbank, Germany’s second-largest bank, had a 93% drop in its net profit in the second quarter from the year-earlier period after writing down all of its Greek sovereign debt exposure. Operating profit fell 77%. However, Commerzbank said its core bank is on track for a 2011 operating profit higher than last year’s 1.98 billion euros.
McDonald’s same-store sales up 5.1%
Same-store sales at McDonald’s restaurants rose 5.1% in July, as the fast-food giant’s sales grew in all regions. McDonald’s continues to benefit from competitive pricing and an increasingly diverse menu. The company’s system-wide sales grew 14% in July.
Macy’s, Polo, Kohl’s profits up, Penney flat
Department store chain Macy’s increased its earnings 64% in the second quarter from a year earlier. Same-store sales grew 6.4% while online sales were up 40%. Polo Ralph Lauren posted a 52% rise in first-quarter earnings and projects revenue growth in the high teens to low-20% range. Kohl’s reported a 17% increase in profits, but sales were up less than 4%, below analysts’ expectations. JCPenney had flat profits and lower sales, reflecting its departure from its catalog business.
Cisco Systems
Networking equipment maker Cisco Systems had a 36% drop in net income in its fiscal fourth quarter as a result of a $772 million restructuring charge. Its revenue rose 3.3% from the year-earlier period, higher than analyst expectations, and the firm’s CEO, John Chambers, said Cisco was making solid progress on turning its fortunes around.
Monday, August 8, 2011
U.S. economic news for the week ended August 5, 2011
Global markets went into a tailspin this week as investors returned their focus to the myriad signs of slowing global growth and the spread of the eurozone debt crisis. Fallout from the debt crisis in Europe, the political standoff on the U.S. government's borrowing limit, and concerns about slower U.S. and global growth sent central banks around the world into crisis mode, cutting interest rates, intervening to support their currencies, and buying bonds in an effort to protect their economies from the spreading crises.
Investors also went into crisis mode, dumping any asset considered risky. On Thursday the Dow Jones Industrial Average dropped 512 points, and the Standard & Poor's 500 Stock Index lost 4.8%. On Friday a better-than-expected U.S. jobs number helped calm market fears. Throughout the week, gold rallied, hitting an intraday record of $1,684.90 per ounce on Thursday, as investors sought a hedge against global market turmoil.
Gloom set in midweek, despite a last-minute deal by U.S. lawmakers to raise the debt ceiling, a measure that allowed the United States to avoid default. Worries that Europe's debt crisis would soon spread to Italy and Spain, whose yields soared to euro-era highs this week, exacerbated market fears, pushed the European Central Bank into action, and sent investors seeking the safety of U.S. Treasuries, whose yields fell to the lowest level of the year.
U.S. and global economic news
U.S. lawmakers agree on deal to raise debt limits, cut spending
On Tuesday President Barack Obama signed a long-debated debt deal that raised the U.S. debt limit and cuts spending. The bill increases the government borrowing limit by $2.4 trillion and cuts $917 billion in federal spending. Moody Investors Service and Fitch Ratings said they would keep the United States at their top "AAA" rating but with a negative outlook. They warned that downgrades were possible if lawmakers fail to enact debt reduction measures and if the economy weakens.
BOJ and SNB intervene to support currencies
The Bank of Japan and Swiss National Bank both intervened in currency markets to stem the rise of their currencies. The BOJ sold yen on Thursday. The move caused the currency to weaken as much as 4% against the U.S. dollar after rising some 5% against the U.S. currency in July. The Bank of Japan also expanded an asset-purchase fund that includes government bonds, real estate investment trusts, and corporate debt to ¥15 trillion from ¥10 trillion. Additionally, it boosted by ¥5 trillion a program aimed at encouraging banks to lend. The SNB unexpectedly cut interest rates and said it would inject $65 billion to stem the franc's record-breaking gains against the euro and the dollar. The Swiss franc has gained about 35% against the U.S. dollar in the past year.
ECB resumes bond buying
After being absent from the market for 18 weeks, the European Central Bank resumed bond purchases and will offer banks more cash in an effort to stop the region's debt crisis from spreading to Italy and Spain, whose yields soared to levels unseen since the euro was introduced. The ECB kept its benchmark interest rate at 1.5%. European officials are essentially trying to build a firewall around these third- and fourth-largest economies to avoid their being forced to seek external aid.
U.S. economy adds more jobs than expected
The U.S. economy added more jobs than expected in July, and the unemployment rate edged down. Nonfarm payrolls rose by 117,000 last month, and payroll data for the previous two months were revised higher by a total of 56,000. The unemployment rate dropped to 9.1% in July from 9.2% in June. Economists had forecast jobs would rise by 75,000 and the unemployment rate would remain at 9.2%.
Turkey cuts rates
Turkey's central bank lowered its key interest rate to a record low of 5.75%, while the Bank of England kept its key rate at 0.5%.
U.S. consumer spending flat; factory activity slumps
U.S. consumer spending was essentially flat in June, falling 0.2%, the biggest drop since September 2009. Personal income increased 0.1%, while wages and salaries that fuel consumer spending declined slightly. The Institute for Supply Management gauge of factory activity showed that the pace of manufacturing slowed sharply in July.
U.S. and global corporate news
Toyota's profit drops 99%; GM sees income double
Toyota Motor's profit fell 99% as it grappled with the yen's surge and crippled output. General Motors' second-quarter profits nearly doubled, as the company sold more vehicles globally and was able to charge more for cars and trucks in the United States.
Comcast, Dunkin, P&G, and LinkedIn report profits
Comcast profits rose 16% as it lost fewer pay-TV customers and sales grew at NBC Universal. Dunkin' Brands profits fell 1% as sales declines at Baskin-Robbins masked growth at Dunkin Donuts and abroad. Proctor & Gamble's fiscal fourth-quarter profit jumped 15% as sales grew across the world, and LinkedIn's second-quarter profit rose 5.1% on strong revenue growth.
Investors also went into crisis mode, dumping any asset considered risky. On Thursday the Dow Jones Industrial Average dropped 512 points, and the Standard & Poor's 500 Stock Index lost 4.8%. On Friday a better-than-expected U.S. jobs number helped calm market fears. Throughout the week, gold rallied, hitting an intraday record of $1,684.90 per ounce on Thursday, as investors sought a hedge against global market turmoil.
Gloom set in midweek, despite a last-minute deal by U.S. lawmakers to raise the debt ceiling, a measure that allowed the United States to avoid default. Worries that Europe's debt crisis would soon spread to Italy and Spain, whose yields soared to euro-era highs this week, exacerbated market fears, pushed the European Central Bank into action, and sent investors seeking the safety of U.S. Treasuries, whose yields fell to the lowest level of the year.
U.S. and global economic news
U.S. lawmakers agree on deal to raise debt limits, cut spending
On Tuesday President Barack Obama signed a long-debated debt deal that raised the U.S. debt limit and cuts spending. The bill increases the government borrowing limit by $2.4 trillion and cuts $917 billion in federal spending. Moody Investors Service and Fitch Ratings said they would keep the United States at their top "AAA" rating but with a negative outlook. They warned that downgrades were possible if lawmakers fail to enact debt reduction measures and if the economy weakens.
BOJ and SNB intervene to support currencies
The Bank of Japan and Swiss National Bank both intervened in currency markets to stem the rise of their currencies. The BOJ sold yen on Thursday. The move caused the currency to weaken as much as 4% against the U.S. dollar after rising some 5% against the U.S. currency in July. The Bank of Japan also expanded an asset-purchase fund that includes government bonds, real estate investment trusts, and corporate debt to ¥15 trillion from ¥10 trillion. Additionally, it boosted by ¥5 trillion a program aimed at encouraging banks to lend. The SNB unexpectedly cut interest rates and said it would inject $65 billion to stem the franc's record-breaking gains against the euro and the dollar. The Swiss franc has gained about 35% against the U.S. dollar in the past year.
ECB resumes bond buying
After being absent from the market for 18 weeks, the European Central Bank resumed bond purchases and will offer banks more cash in an effort to stop the region's debt crisis from spreading to Italy and Spain, whose yields soared to levels unseen since the euro was introduced. The ECB kept its benchmark interest rate at 1.5%. European officials are essentially trying to build a firewall around these third- and fourth-largest economies to avoid their being forced to seek external aid.
U.S. economy adds more jobs than expected
The U.S. economy added more jobs than expected in July, and the unemployment rate edged down. Nonfarm payrolls rose by 117,000 last month, and payroll data for the previous two months were revised higher by a total of 56,000. The unemployment rate dropped to 9.1% in July from 9.2% in June. Economists had forecast jobs would rise by 75,000 and the unemployment rate would remain at 9.2%.
Turkey cuts rates
Turkey's central bank lowered its key interest rate to a record low of 5.75%, while the Bank of England kept its key rate at 0.5%.
U.S. consumer spending flat; factory activity slumps
U.S. consumer spending was essentially flat in June, falling 0.2%, the biggest drop since September 2009. Personal income increased 0.1%, while wages and salaries that fuel consumer spending declined slightly. The Institute for Supply Management gauge of factory activity showed that the pace of manufacturing slowed sharply in July.
U.S. and global corporate news
Toyota's profit drops 99%; GM sees income double
Toyota Motor's profit fell 99% as it grappled with the yen's surge and crippled output. General Motors' second-quarter profits nearly doubled, as the company sold more vehicles globally and was able to charge more for cars and trucks in the United States.
Comcast, Dunkin, P&G, and LinkedIn report profits
Comcast profits rose 16% as it lost fewer pay-TV customers and sales grew at NBC Universal. Dunkin' Brands profits fell 1% as sales declines at Baskin-Robbins masked growth at Dunkin Donuts and abroad. Proctor & Gamble's fiscal fourth-quarter profit jumped 15% as sales grew across the world, and LinkedIn's second-quarter profit rose 5.1% on strong revenue growth.
Sunday, July 31, 2011
U.S. economic news for the week ended July 29, 2011
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.
back to top
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.
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.
back to top
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.
Subscribe to:
Comments (Atom)