U.S. Economic News Week Ending Febuary 25, 2011

The worlds focus remained fixed on the Middle East this week, with investor anxiety rising as violence escalated in Libya, the third-largest oil producer in Africa. Oil prices rose and currencies of countries reliant on oil exports, including Indias rupee and South Koreas won, fell. Stock markets gave back recent gains on fears unrest could spread to larger oil producers, such as Saudi Arabia or Iran.

The U.S. economy grew at a slightly slower pace than had been estimated for the fourth quarter of 2010. However, other economic reports were encouraging, including lower first-time U.S. jobless claims and rising consumer confidence in the eurozone and United States. Corporate profits rose as well. Particularly noteworthy was General Motors, which reached a major milestone by posting an annual profit just two years after almost collapsing under the weight of its debt.

While major stock indices fell almost universally this week on fears of a potentially widespread economic setback from oil interruptions and soaring prices, the price rose for U.S. Treasuries, a classic safe-haven asset.

Global economic news

Oil futures crest at $100 a barrel
Crude oil prices reached their highest levels in more than two years as a result of growing violence and oil supply disruptions in Libya. Oil futures in London hit $120 a barrel on Thursday before receding to $112. The April contract on the New York Mercantile Exchange traded above $103 a barrel on Thursday before retreating below $98. Prices stabilized after Saudi Arabia, the United States, and the International Energy Agency reassured markets that global supplies would be sufficient, even without Libya's production. Just last week, oil had traded in the range of $86 to $87 a barrel.

U.S. economy grows, but shy of the 3.2% forecast
U.S. real gross domestic product grew at an annual rate of 2.8% in the fourth quarter of 2010, below the estimate of 3.2%, the U.S. Department of Commerce reported. Real GDP increased 2.6% in the third quarter. Personal consumption expenditures, exports, and nonresidential fixed investments contributed to growth, while personal inventory investment and state and local government spending detracted. Imports, which are deducted from GDP, decreased. Overall, the 2.8% growth figure is consistent with forecasts of a slow-growth economic recovery.

First-time U.S. jobless claims decrease again
U.S. initial jobless claims declined for the third time in four weeks, and the four-week average dipped to its lowest level in two and a half years, the U.S. Department of Labor reported. For the week ending February 19, first-time unemployment claims dropped by 22,000 to a seasonally adjusted 391,000. The four-week average fell to 402,000.

U.S. new home sales fall more than expected
Sales of new homes in the U.S. fell more than forecast in January, slipping 13% to a pace of 284,000 a year, according to a report from the Commerce Department. Tight credit standards and 9% unemployment are weighing down home construction. However, mortgage rates fell to 4.95% for a 30-year mortgage, a result of the drop in Treasury yields, as investor demand for safe-haven assets rose. Lower rates could help stimulate home sales.

Eurozone confidence rises
Economic confidence within the eurozone, as measured by the European Commissions Economic Sentiment Indicator, rose to 107.8 from 106.8 in January, its highest reading since September 2007.

U.S. consumer confidence climbs
Consumer confidence in the United States rebounded to its highest level since April 2008, based on the Bloomberg Consumer Comfort Indexs -39.2 reading in the week ended February 20, up from -43.4 the previous week.
Global corporate news

GM posts first profit in six years
General Motors earned $4.7 billion in 2010, its best annual performance in more than a decade and its first yearly profit since 2004. GMs global sales rose 12.2% in 2010, to 8.39 million. It sold just 30,000 fewer vehicles than Toyota, the automaker that a year ago displaced GM as the worlds largest.

Boeing lands $35 billion government contract
The U.S. Air Force awarded Boeing a $35 billion contract to build aerial refueling tankers, preserving Boeings longstanding position as a leading Air Force supplier.

RBS registers small quarterly profit
Royal Bank of Scotland posted a modest profit in the fourth quarter of 2010 and reduced its annual loss to 1.13 billion from 3.6 billion pounds in 2009. Net profit for the fourth quarter was 12 million pounds. The banks net interest margin rose while income at its investment banking division fell substantially.

Allianz increases earnings, raises dividend
Allianz, Europes largest insurer by gross premium income, reported an 11% increase in fourth-quarter net profit on improvements in its property and casualty business, higher revenues, and fewer natural-disaster claims.

European telecom giants stumble
Spanish telecommunications giant Telefonica posted a 45% drop in fourth-quarter net profit because of sharply higher operating costs, while Deutsche Telekoms loss deepened as a result of steeper impairment and restructuring charges (400 million) in 2010.

Toyota recalls 2.2 million vehicles
Toyota announced a recall of 2.2 million vehicles over the much-publicized sticky-accelerator pedal problem, which has caused pedals to become trapped under floor mats because of faulty design.