Stock markets stabilized this week despite heavy selling that followed a Standard & Poor's warning on the U.S. credit rating. On Wednesday the Dow Jones Industrial average finished at its highest closing level in nearly three years amid strong earnings reports that have buoyed investor enthusiasm despite still-shaky economic data. Many global stock markets will be closed Friday, April 22 in observance of Good Friday.
Global economic news
S&P signals U.S. credit rating in danger
S&P lowered its outlook on U.S. government debt to "negative" from "stable." The warning came as U.S. government debt mounts; however the agency did not lower its "AAA"-rating for U.S. Treasury securities.
OECD cuts Japan's economic outlook
The Organization for Economic Cooperation and Development (OECD) said it expects Japan's economy to slow significantly this year after last month's earthquake and tsunami. The group said the slowing will come as the government is forced to cut spending on various programs to rebuild the country's battered northeast region. It said it expects gross domestic product to expand 0.8% this year, down from its previous forecast of 1.7%. The OECD added that it expects the economy will expand 2.3% in 2012, faster than its previous estimate of 1.3%, as reconstruction spending picks up.
Eurozone grows more than expected
The eurozone economy grew more than anticipated in April, according to preliminary results from the financial information firm Markit. Meanwhile inflation pressures continued to build, and consumer confidence fell to its lowest level in eight months, an indication that the high price of oil and inflation may be weighing on domestic demand. On Thursday, Germany's Ifo institute reported that German business confidence fell in April for a second month.
U.S. housing starts and existing sales increase
Strong reports from the U.S. housing sector gave investor enthusiasm a boost this week with better-than-expected news on housing starts and existing homes sales. Homebuilding rebounded 7.2% in March and existing home sales increased 3.7%. However, construction remains near historically low levels heading into the spring selling season, and the National Association of Homebuilders housing market index fell to 16 in April from 17. Readings below 50 indicate more builders are pessimistic about conditions than are optimistic.
U.S. jobless claims fall less than expected
Initial jobless claims fell less than forecast last week, indicating that the labor market is still struggling to improve. Claims decreased by 13,000 to 403,000 in the week ended April 16.
Global corporate news
IBM and Intel post strong profit reports
As has been the case in the past several quarters, first-quarter corporate earnings are on track to beat analysts' estimates. Technology giants IBM and Intel both reported strong sales and profits in the first quarter. IBM reported the highest revenue growth — 7.7% — that the company has seen in 10 years. Intel's profits rose 34%, and its revenues jumped 25%.
Apple's profit rises 95%
Apple's first-quarter profit nearly doubled, jumping 95% from the same quarter last year, amid strong sales of its iPhone. Revenue rose 83%, and the company reported that it remained largely unscathed by Japan's earthquake and the medical leave of chief executive Steve Jobs.
GE reports 77% profit increase
General Electric reported a 77% increase in its first-quarter earnings and boosted its quarterly dividend by 15 cents. The earnings increase came amid an improvement in the company's GE Capital financing arm and gains at most of its industrial units.
Financial companies report mixed results
Morgan Stanley reported better-than-expected first-quarter earnings as trading revenues more than doubled from the fourth quarter. Citigroup's profit fell 32% to $3 billion. Goldman Sachs beat earnings estimates but its shares fell on concerns the firm will have problems posting strong profits going forward.
Halliburton's profits more than double
One year after the oil rig explosion and spill in the Gulf of Mexico, Halliburton posted strong results for the first quarter as it remained largely unaffected by the last year's Deepwater Horizon disaster in the Gulf of Mexico. Halliburton was one of the several service providers on the Deepwater Horizon drilling rig and designed the failed cement seal that is believed to have allowed explosive gas to flow into the well. The company's first-quarter profit more than doubled to $511 million from $206 million a year ago.
NRG drops reactor plans
NRG said it is dropping plans to build two nuclear reactors in Texas. This is seen as the most tangible evidence to date of the ramifications in the United States from the nuclear plant accident in Japan.
Thursday, April 21, 2011
Friday, April 8, 2011
U.S. Economic News Week Ending April 8, 2011
In a week of sharp contrasts, encouraging economic news from the United States, Europe, and Asia mixed with fresh concerns regarding Portugal, which is now the third eurozone member to request a financial bailout. Meanwhile, the U.S. federal governments budget showdown was going down to the wire, with potential widespread impacts. The U.S. dollar weakened on uncertainty over the possible government shutdown. And just as Japan was taking steps toward regaining a sense of normalcy after the March 11 earthquake, a less powerful earthquake, measuring 7.1, hit the northeast area of the country Thursday, shaking buildings and nerves. Unrest continued in the Middle East, pushing the price of oil higher.
Late in the week, light crude oil for May delivery was trading at more than $111 per barrel. Gold for June delivery was above $1,470 while silver reached a 31-year high, rising above $40 an ounce partly in response to U.S. dollar weakness.
Trading in major global stock indices was fairly calm, as investors appeared hopeful the signs of economic recovery might offset the short-term political uncertainty.
Global economic news
U.S. budget battle showdown down to wire
With high stakes and credibility on the line, and facing a firm deadline of midnight Friday, Democrats and Republicans in the U.S. Congress kept negotiating the 2011 federal budget overnight Thursday into Friday morning. At issue: proposed spending cuts of $33 billion to $40 billion and political differences on various issues. At stake: shutting down all-but-essential government services, furloughing 800,000 federal employees, and cutting off paychecks to workers. Among many ripple effects: suspending government mortgage loan guarantees to lower-income families, closing national parks and leaving tourist industry workers without pay, and stopping government economic data collection. A 20-day government shutdown in late 1995 reportedly cut economic growth by a full percentage point in that quarter.
U.S. jobless claims shrink further
The number of new claims for unemployment benefits fell by 10,000 to 382,000 during the week ended April 2, marking the seventh decrease in 10 weeks. The four-week average fell by 5,750 to 389,500.
U.S. service sector growth eases
The U.S. nonmanufacturing sector grew in March, but at a slower pace than February, according to the Institute for Supply Management. The ISM nonmanufacturing purchasing managers index fell to 57.3 from 59.7 in February.
March retail sales strong
American consumers spent more freely in March, allowing retailers from discounters to sellers of luxury brands - to post strong sales figures. A group of 25 retailers tracked by Thomson Reuters posted a 1.7% rise in same-store sales in March. Costco reported a 13% rise in same-store sales, while Victoria Secrets parent firm Limited Brands increased sales by 14%. Higher-end retailers Saks and Nordstrom also had robust results. Target, Kohls, and JC Penney were among the retail chains with declining same-store sales.
ECB raises interest rates
The European Central Bank raised its benchmark interest rate on Thursday by 0.25 percentage points, as was widely anticipated. The ECB must walk a fine line, between controlling inflation, already at a 2.6% annual rate last month, and not creating obstacles to economic recovery for troubled eurozone member countries Greece, Ireland, and Portugal.
China raises interest rates for fourth time; inflation still high
Chinas central bank raised interest rates for the fourth time in six months in its latest effort to tame inflation and stop the worlds fastest-growing economy from overheating. Consumer prices in China rose 4.9% in February while producer prices were 7.2% higher. Even with tighter controls in place, many economists cited in The New York Times see Chinas economy growing 9% in 2011 with a 3% annual inflation rate.
Portuguese government to receive bailout package
The Portuguese government is seeking financial assistance from the European Union as it strives to regain solid financial footing. A package worth 90 billion ($129 billion) is being worked on involving the European Commission, European Central Bank, and International Monetary Fund. It could take several weeks to work out an austerity program that would accompany the bailout. Portugal is the third nation in the eurozone, after Greece and Ireland, to ask for a bailout.
Portuguese debt downgrade led to rising yields
Portugals debt rating continued to plummet and its government bond yields soared this week after Moodys Investor Service downgraded Portugals long-term bonds by one level, to "Baa1" from "A3." Standard & Poors lowered its rating for Portuguese debt by three notches in two cuts in the last couple of weeks. The Portuguese government paid an average yield of 5.117% on six-month Treasury bills at an auction on Wednesday, compared with 2.984% at a March 2 auction. The average yield on 12-month Portuguese Treasury bills rose to 5.902%, from 4.441% on March 16.
Japanese business confidence falls
Japanese business sentiment is sagging after Marchs devastating earthquake and tsunami, according to a quarterly survey released Monday by Japans central bank. Sentiment went from a reading of plus 3 before the earthquake to minus 2 afterwards. Economists believe overall industrial production slumped by 10% in March compared with February and the economic fallout could continue for months. Meanwhile, a so-called "economy watchers survey" that regularly questions hotel and restaurant workers, barbers, and tax drivers on economic sentiment fell to 27.7 in March from a reading of 48.4 in February.
Toyota, Japanese airlines to resume activity
Toyota said it would resume limited production from April 18 to 27 at its Japanese plants, where half of all its vehicles sold globally are built. Japans major airlines plan to restart flights to the Sendai airport, which had shut downs after the March 11 tsunami.
Eurozone business growth eases slightly
Private-sector growth in the eurozone eased a bit in March, according to a survey released this week by financial information firm Markit. Its eurozone composite output index eased to 57.6 from 58.2 in February. Any reading above 50 indicates economic growth.
German manufacturing orders, industrial production rise
German manufacturing orders were 2.4% higher in February than January, as domestic and eurozone demand improved. This adds to a 3.1% increase in January orders. Meanwhile, German industrial production rose 1.6% in February from January and 14.8% from February 2010, another strong sign of economic recovery in Germany.
Global corporate news
TI chips in $6.5 billion for National Semiconductor
Texas Instruments offered $6.5 billion in cash to buy its rival semiconductor chipmaker National Semiconductor. The bid represented a 78% premium over Nationals stock price at the time of the bid, indicating how highly TI values Nationals niche of making chips based on analog technology that are used in cell-phone radio signals and in the management of power consumption in computers.
Bombardier profits take off
Canadian plane, train and snowmobile maker Bombardier rode a big pickup in business-jet orders to much higher fourth-quarter earnings. The Montreal-based firm almost tripled its net aerospace orders in its latest quarter while selling 10 times as many business aircraft as a year earlier, propelling its profits 82% higher than the year-earlier quarter.
Bite taken out of Apples size on Nasdaq 100
Apple will have a large bite taken out of its weighting on the closely tracked Nasdaq 100 Index as part of a large and rare rebalancing of the index on May 2. After the rebalancing, Apple will make up 12% of the Nasdaq 100 versus 20% today. The rebalancing was partly driven by Apples meteoric rise, as the firms shares have grown more than fourfold in two years, causing Apple to have too great an impact on one of the most heavily traded stock indices. More than $330 billion of assets track the Nasdaq 100 through ETFs, mutual funds, options, and futures.
KB Home loss grows on weak home sales
Home builder KB Home saw its first-quarter loss more than double from a year earlier on falling orders and a substantial decrease in revenue. Deliveries fell 28% and net orders were 32% lower. The year-over-year comparison was unfavorable partly because of the temporary boost provided by last years federal tax credit for homebuyers.
Toyota faces possible downgrade
Moodys Investor Service said it has put Toyota Motor and its subsidiaries on review for a possible downgrade as a result of the financial impact caused by the March 11 earthquake and tsunami and the resulting interruption of automobile and auto parts production. Moodys is also closely watching the quakes impact on Nissan Motor and Honda Motor.
Dish wins Blockbuster deal
In a dramatic marathon bankruptcy auction, Dish Network made a winning $320-million bid for the assets of Blockbuster, the movie-rental chain. Dish may use some Blockbuster stores to sell subscriptions to its service and is reportedly interested in some synergies from Blockbusters on-demand business in a potential effort to challenge Netflix.
Late in the week, light crude oil for May delivery was trading at more than $111 per barrel. Gold for June delivery was above $1,470 while silver reached a 31-year high, rising above $40 an ounce partly in response to U.S. dollar weakness.
Trading in major global stock indices was fairly calm, as investors appeared hopeful the signs of economic recovery might offset the short-term political uncertainty.
Global economic news
U.S. budget battle showdown down to wire
With high stakes and credibility on the line, and facing a firm deadline of midnight Friday, Democrats and Republicans in the U.S. Congress kept negotiating the 2011 federal budget overnight Thursday into Friday morning. At issue: proposed spending cuts of $33 billion to $40 billion and political differences on various issues. At stake: shutting down all-but-essential government services, furloughing 800,000 federal employees, and cutting off paychecks to workers. Among many ripple effects: suspending government mortgage loan guarantees to lower-income families, closing national parks and leaving tourist industry workers without pay, and stopping government economic data collection. A 20-day government shutdown in late 1995 reportedly cut economic growth by a full percentage point in that quarter.
U.S. jobless claims shrink further
The number of new claims for unemployment benefits fell by 10,000 to 382,000 during the week ended April 2, marking the seventh decrease in 10 weeks. The four-week average fell by 5,750 to 389,500.
U.S. service sector growth eases
The U.S. nonmanufacturing sector grew in March, but at a slower pace than February, according to the Institute for Supply Management. The ISM nonmanufacturing purchasing managers index fell to 57.3 from 59.7 in February.
March retail sales strong
American consumers spent more freely in March, allowing retailers from discounters to sellers of luxury brands - to post strong sales figures. A group of 25 retailers tracked by Thomson Reuters posted a 1.7% rise in same-store sales in March. Costco reported a 13% rise in same-store sales, while Victoria Secrets parent firm Limited Brands increased sales by 14%. Higher-end retailers Saks and Nordstrom also had robust results. Target, Kohls, and JC Penney were among the retail chains with declining same-store sales.
ECB raises interest rates
The European Central Bank raised its benchmark interest rate on Thursday by 0.25 percentage points, as was widely anticipated. The ECB must walk a fine line, between controlling inflation, already at a 2.6% annual rate last month, and not creating obstacles to economic recovery for troubled eurozone member countries Greece, Ireland, and Portugal.
China raises interest rates for fourth time; inflation still high
Chinas central bank raised interest rates for the fourth time in six months in its latest effort to tame inflation and stop the worlds fastest-growing economy from overheating. Consumer prices in China rose 4.9% in February while producer prices were 7.2% higher. Even with tighter controls in place, many economists cited in The New York Times see Chinas economy growing 9% in 2011 with a 3% annual inflation rate.
Portuguese government to receive bailout package
The Portuguese government is seeking financial assistance from the European Union as it strives to regain solid financial footing. A package worth 90 billion ($129 billion) is being worked on involving the European Commission, European Central Bank, and International Monetary Fund. It could take several weeks to work out an austerity program that would accompany the bailout. Portugal is the third nation in the eurozone, after Greece and Ireland, to ask for a bailout.
Portuguese debt downgrade led to rising yields
Portugals debt rating continued to plummet and its government bond yields soared this week after Moodys Investor Service downgraded Portugals long-term bonds by one level, to "Baa1" from "A3." Standard & Poors lowered its rating for Portuguese debt by three notches in two cuts in the last couple of weeks. The Portuguese government paid an average yield of 5.117% on six-month Treasury bills at an auction on Wednesday, compared with 2.984% at a March 2 auction. The average yield on 12-month Portuguese Treasury bills rose to 5.902%, from 4.441% on March 16.
Japanese business confidence falls
Japanese business sentiment is sagging after Marchs devastating earthquake and tsunami, according to a quarterly survey released Monday by Japans central bank. Sentiment went from a reading of plus 3 before the earthquake to minus 2 afterwards. Economists believe overall industrial production slumped by 10% in March compared with February and the economic fallout could continue for months. Meanwhile, a so-called "economy watchers survey" that regularly questions hotel and restaurant workers, barbers, and tax drivers on economic sentiment fell to 27.7 in March from a reading of 48.4 in February.
Toyota, Japanese airlines to resume activity
Toyota said it would resume limited production from April 18 to 27 at its Japanese plants, where half of all its vehicles sold globally are built. Japans major airlines plan to restart flights to the Sendai airport, which had shut downs after the March 11 tsunami.
Eurozone business growth eases slightly
Private-sector growth in the eurozone eased a bit in March, according to a survey released this week by financial information firm Markit. Its eurozone composite output index eased to 57.6 from 58.2 in February. Any reading above 50 indicates economic growth.
German manufacturing orders, industrial production rise
German manufacturing orders were 2.4% higher in February than January, as domestic and eurozone demand improved. This adds to a 3.1% increase in January orders. Meanwhile, German industrial production rose 1.6% in February from January and 14.8% from February 2010, another strong sign of economic recovery in Germany.
Global corporate news
TI chips in $6.5 billion for National Semiconductor
Texas Instruments offered $6.5 billion in cash to buy its rival semiconductor chipmaker National Semiconductor. The bid represented a 78% premium over Nationals stock price at the time of the bid, indicating how highly TI values Nationals niche of making chips based on analog technology that are used in cell-phone radio signals and in the management of power consumption in computers.
Bombardier profits take off
Canadian plane, train and snowmobile maker Bombardier rode a big pickup in business-jet orders to much higher fourth-quarter earnings. The Montreal-based firm almost tripled its net aerospace orders in its latest quarter while selling 10 times as many business aircraft as a year earlier, propelling its profits 82% higher than the year-earlier quarter.
Bite taken out of Apples size on Nasdaq 100
Apple will have a large bite taken out of its weighting on the closely tracked Nasdaq 100 Index as part of a large and rare rebalancing of the index on May 2. After the rebalancing, Apple will make up 12% of the Nasdaq 100 versus 20% today. The rebalancing was partly driven by Apples meteoric rise, as the firms shares have grown more than fourfold in two years, causing Apple to have too great an impact on one of the most heavily traded stock indices. More than $330 billion of assets track the Nasdaq 100 through ETFs, mutual funds, options, and futures.
KB Home loss grows on weak home sales
Home builder KB Home saw its first-quarter loss more than double from a year earlier on falling orders and a substantial decrease in revenue. Deliveries fell 28% and net orders were 32% lower. The year-over-year comparison was unfavorable partly because of the temporary boost provided by last years federal tax credit for homebuyers.
Toyota faces possible downgrade
Moodys Investor Service said it has put Toyota Motor and its subsidiaries on review for a possible downgrade as a result of the financial impact caused by the March 11 earthquake and tsunami and the resulting interruption of automobile and auto parts production. Moodys is also closely watching the quakes impact on Nissan Motor and Honda Motor.
Dish wins Blockbuster deal
In a dramatic marathon bankruptcy auction, Dish Network made a winning $320-million bid for the assets of Blockbuster, the movie-rental chain. Dish may use some Blockbuster stores to sell subscriptions to its service and is reportedly interested in some synergies from Blockbusters on-demand business in a potential effort to challenge Netflix.
U.S. Economic News Week Ending April 1, 2011
Stocks closed out the first quarter of 2011 with the Dow Jones Industrial Average gaining 742 points, its biggest first-quarter point gain in more than a decade. The Standard & Poors 500 Stock Index ended the quarter up 4.8%, its best first-quarter performance since 1998. A surge in merger and acquisition activity renewed optimism among investors that the global recovery remained on track despite spreading political turmoil in the Middle East, sustained higher oil prices, lingering economic and environmental concerns following the Japan earthquake, and sovereign debt downgrades for Greece and Portugal.
Global economic news
U.S. economy creates 216,000 jobs; unemployment rate dips to 8.8%
In a sign that the U.S. labor market may be strengthening, the nations companies added 216,000 jobs in March, more than the 190,000 gain projected by a number of leading economists. The U.S. Department of Labor reported that the jobless rate fell again in March to a two-year low of 8.8%. The governments jobs creation figure is even higher than the 201,000 jobs ADP Employer Services estimated were added to U.S. payrolls last month.
Home prices in U.S. drop again in January
The average price of single-family homes in 20 major U.S. metropolitan areas fell 3.1% from a year ago, according to the Standard & Poors/Case-Shiller Home Price Index. January is the sixth month in a row that U.S. home prices have fallen. Eighteen of the twenty markets covered by the survey recorded year-over-year price declines.
Consumer spending in U.S. rises in February
U.S. consumer spending jumped 0.7% in February, the eighth-straight month of increases. In addition, the U.S. Department of Commerce said that personal incomes rose 0.3% for the month. Still, higher consumer prices absorbed a significant portion of the spending increase. After inflation, the increase was a more modest 0.3%.
U.S. Treasury recoups TARP funds
The U.S. Department of the Treasury reported that money it loaned to banks during the financial crisis has been paid back. The federal bailout and its Troubled Asset Relief Program (TARP) is currently $6 billion in the black. Still, according to published reports, Treasury Secretary Timothy Geithner admitted that the federal government has more work to do repairing the damage caused by the crisis and strengthening the recovery, but today is an important milestone in our efforts to recover taxpayer dollars as we continue winding down TARP.
Confidence of U.S. consumers falls from three-year high
The Conference Boards Consumer Confidence Index fell more than anticipated to 63.4 in March from a revised 72.0 in February. The sharp decline in confidence was driven by a number of global and economic factors, including rising gas and oil prices, the Japan crisis, and ongoing unrest in the Middle East.
Americas CEOs report encouraging outlook for sales, jobs
The Business Roundtable, an association of CEOs at the largest U.S. companies, reported in its first-quarter survey that nearly all its members expect sales to increase over the next six months. More than 60% expect additional investment in their businesses, and over half plan to hire more workers in the next two quarters.
U.S. businesses expand at a faster-than-expected pace
The Institute for Supply Management said its business barometer slipped to 70.6 in March from a reading of 71.2 in February. The index surpassed the 69.6 median projected by economists surveyed by Bloomberg News. An index reading greater than 50 indicates business expansion.
S&P downgrades Greece, Portugal
Ratings agency Standard & Poors lowered its rating of Greek sovereign debt two notches to BB- from BB+, dropping the countrys debt further into junk territory. S&P also cut Portugals senior debt rating by one notch to BBB- from BBB. The most recent cut follows last weeks two-notch downgrade of Portugal, which is now close to losing its investment-grade status for the first time. The outlook for both countries ratings remains negative, according to S&P. Greece has already accepted a three-year plan of emergency help from the European Union and International Monetary Fund. Standard & Poors expects Portugal to ask the IMF and the European Financial Stability Facility for a similar bailout package.
Irish banks need additional 24 billion
A plan to nationalize Irelands banking sector may be imminent after a third round of stress tests revealed that the countrys banks will need an additional capital influx of 24 billion. The stress tests are a condition of the bailout the Irish government agreed to with the European Union and International Monetary Fund in November. With the latest bailout, the total cost of the bank rescue is approximately 70 billion. Irelands government also announced plans for an overhaul of the countrys banking system aimed at restoring investor confidence.
Eurozone confidence slips in March
An index of executive and consumer sentiment in the 17-nation euro region fell slightly to 107.3 in March from a revised 107.9 in February, the European Commission said. The drop in the confidence measure was larger than economists had forecast, as rising oil prices, Middle East unrest, and Japans earthquake resulted in rising pessimism for global growth prospects. Februarys reading was the highest for the index since August 2007.
German unemployment falls to lowest level since 1992
The number of Germans who were out of work dropped a seasonally adjusted 55,000 to 3.01 million, according to the Nuremberg-based Federal Labor Agency. That is the lowest level since June 1992. Germanys unemployment rate fell to 7.1% in March from 7.3% the month before.
Global corporate news
Fujitsu says impact of Japans earthquake to be in billions of yen
Following the countrys March 11 earthquake and tsunami, Japanese electronics conglomerate Fujitsu will have to revise its earnings forecasts for the fiscal year ending this month. Fujitsus president said the quakes impact on earnings will likely exceed several billions of yen. Fujitsu, which has resumed most of its operations in the quake-hit region, is among several major Japanese companies affected by one of the largest natural disasters in the countrys history.
Harry & David to file for bankruptcy protection
Harry & David announced it is preparing to file for Chapter 11 bankruptcy protection. In a prearranged deal with creditors, the specialty gourmet fruit retailer will convert its bond debt to equity and seek to raise additional capital through a new stock sale. The company has been struggling as consumers cut back in the weak economy. In January, the 75-year-old retailer reported that revenue during the critical holiday quarter fell nearly 2%, and last month the company cut approximately 100 jobs.
EBay to buy GSI Commerce for $2.4 billion
EBay agreed to purchase e-commerce company GSI Commerce for $2.4 billion, extending eBays reach into Internet retailing and intensifying the companys rivalry with Amazon. GSIs core business is providing e-commerce infrastructure e-store technology, payment processing, fulfillment, marketing, and customer service for more than 180 top brands and retailers.
GE to purchase stake in Converteam
General Electric agreed to pay $3.2 billion in cash for a controlling stake in Converteam, the power conversion company. The acquisition of the French company, which serves a variety of industries including oil and gas companies, is the latest in a string of deals totaling $11 billion over the past six months aimed at expanding GEs energy business. They have also acquired Dresser Inc., Wellstream Holdings, Lineage Power Holdings, and John Wood Groups well support division.
Qihoo goes public
Chinese Internet company Qihoo 360 went public this week on the New York Stock Exchange, and the companys shares immediately doubled at the start of trading. The Internet software company, which sells antivirus software and security services, raised more than $175 million in its IPO. Qihoo also makes the second-most-used Internet browser in China, behind Microsofts Internet Explorer.
Galaxy reports profit drop
Galaxy Entertainment Group said its net profit fell 22% last year in part because of one-time accounting and valuation adjustments. The casino operator, controlled by the family of tycoon Lui Che Woo, reported that net profit totaled HK$898.46 million last year, down from HK$1.15 billion in 2009. Galaxy is moving ahead with plans to open a HK$14.9 billion casino-resort in Macaus lucrative Cotai area.
Global economic news
U.S. economy creates 216,000 jobs; unemployment rate dips to 8.8%
In a sign that the U.S. labor market may be strengthening, the nations companies added 216,000 jobs in March, more than the 190,000 gain projected by a number of leading economists. The U.S. Department of Labor reported that the jobless rate fell again in March to a two-year low of 8.8%. The governments jobs creation figure is even higher than the 201,000 jobs ADP Employer Services estimated were added to U.S. payrolls last month.
Home prices in U.S. drop again in January
The average price of single-family homes in 20 major U.S. metropolitan areas fell 3.1% from a year ago, according to the Standard & Poors/Case-Shiller Home Price Index. January is the sixth month in a row that U.S. home prices have fallen. Eighteen of the twenty markets covered by the survey recorded year-over-year price declines.
Consumer spending in U.S. rises in February
U.S. consumer spending jumped 0.7% in February, the eighth-straight month of increases. In addition, the U.S. Department of Commerce said that personal incomes rose 0.3% for the month. Still, higher consumer prices absorbed a significant portion of the spending increase. After inflation, the increase was a more modest 0.3%.
U.S. Treasury recoups TARP funds
The U.S. Department of the Treasury reported that money it loaned to banks during the financial crisis has been paid back. The federal bailout and its Troubled Asset Relief Program (TARP) is currently $6 billion in the black. Still, according to published reports, Treasury Secretary Timothy Geithner admitted that the federal government has more work to do repairing the damage caused by the crisis and strengthening the recovery, but today is an important milestone in our efforts to recover taxpayer dollars as we continue winding down TARP.
Confidence of U.S. consumers falls from three-year high
The Conference Boards Consumer Confidence Index fell more than anticipated to 63.4 in March from a revised 72.0 in February. The sharp decline in confidence was driven by a number of global and economic factors, including rising gas and oil prices, the Japan crisis, and ongoing unrest in the Middle East.
Americas CEOs report encouraging outlook for sales, jobs
The Business Roundtable, an association of CEOs at the largest U.S. companies, reported in its first-quarter survey that nearly all its members expect sales to increase over the next six months. More than 60% expect additional investment in their businesses, and over half plan to hire more workers in the next two quarters.
U.S. businesses expand at a faster-than-expected pace
The Institute for Supply Management said its business barometer slipped to 70.6 in March from a reading of 71.2 in February. The index surpassed the 69.6 median projected by economists surveyed by Bloomberg News. An index reading greater than 50 indicates business expansion.
S&P downgrades Greece, Portugal
Ratings agency Standard & Poors lowered its rating of Greek sovereign debt two notches to BB- from BB+, dropping the countrys debt further into junk territory. S&P also cut Portugals senior debt rating by one notch to BBB- from BBB. The most recent cut follows last weeks two-notch downgrade of Portugal, which is now close to losing its investment-grade status for the first time. The outlook for both countries ratings remains negative, according to S&P. Greece has already accepted a three-year plan of emergency help from the European Union and International Monetary Fund. Standard & Poors expects Portugal to ask the IMF and the European Financial Stability Facility for a similar bailout package.
Irish banks need additional 24 billion
A plan to nationalize Irelands banking sector may be imminent after a third round of stress tests revealed that the countrys banks will need an additional capital influx of 24 billion. The stress tests are a condition of the bailout the Irish government agreed to with the European Union and International Monetary Fund in November. With the latest bailout, the total cost of the bank rescue is approximately 70 billion. Irelands government also announced plans for an overhaul of the countrys banking system aimed at restoring investor confidence.
Eurozone confidence slips in March
An index of executive and consumer sentiment in the 17-nation euro region fell slightly to 107.3 in March from a revised 107.9 in February, the European Commission said. The drop in the confidence measure was larger than economists had forecast, as rising oil prices, Middle East unrest, and Japans earthquake resulted in rising pessimism for global growth prospects. Februarys reading was the highest for the index since August 2007.
German unemployment falls to lowest level since 1992
The number of Germans who were out of work dropped a seasonally adjusted 55,000 to 3.01 million, according to the Nuremberg-based Federal Labor Agency. That is the lowest level since June 1992. Germanys unemployment rate fell to 7.1% in March from 7.3% the month before.
Global corporate news
Fujitsu says impact of Japans earthquake to be in billions of yen
Following the countrys March 11 earthquake and tsunami, Japanese electronics conglomerate Fujitsu will have to revise its earnings forecasts for the fiscal year ending this month. Fujitsus president said the quakes impact on earnings will likely exceed several billions of yen. Fujitsu, which has resumed most of its operations in the quake-hit region, is among several major Japanese companies affected by one of the largest natural disasters in the countrys history.
Harry & David to file for bankruptcy protection
Harry & David announced it is preparing to file for Chapter 11 bankruptcy protection. In a prearranged deal with creditors, the specialty gourmet fruit retailer will convert its bond debt to equity and seek to raise additional capital through a new stock sale. The company has been struggling as consumers cut back in the weak economy. In January, the 75-year-old retailer reported that revenue during the critical holiday quarter fell nearly 2%, and last month the company cut approximately 100 jobs.
EBay to buy GSI Commerce for $2.4 billion
EBay agreed to purchase e-commerce company GSI Commerce for $2.4 billion, extending eBays reach into Internet retailing and intensifying the companys rivalry with Amazon. GSIs core business is providing e-commerce infrastructure e-store technology, payment processing, fulfillment, marketing, and customer service for more than 180 top brands and retailers.
GE to purchase stake in Converteam
General Electric agreed to pay $3.2 billion in cash for a controlling stake in Converteam, the power conversion company. The acquisition of the French company, which serves a variety of industries including oil and gas companies, is the latest in a string of deals totaling $11 billion over the past six months aimed at expanding GEs energy business. They have also acquired Dresser Inc., Wellstream Holdings, Lineage Power Holdings, and John Wood Groups well support division.
Qihoo goes public
Chinese Internet company Qihoo 360 went public this week on the New York Stock Exchange, and the companys shares immediately doubled at the start of trading. The Internet software company, which sells antivirus software and security services, raised more than $175 million in its IPO. Qihoo also makes the second-most-used Internet browser in China, behind Microsofts Internet Explorer.
Galaxy reports profit drop
Galaxy Entertainment Group said its net profit fell 22% last year in part because of one-time accounting and valuation adjustments. The casino operator, controlled by the family of tycoon Lui Che Woo, reported that net profit totaled HK$898.46 million last year, down from HK$1.15 billion in 2009. Galaxy is moving ahead with plans to open a HK$14.9 billion casino-resort in Macaus lucrative Cotai area.
U.S. Economic News Week Ending March 25, 2011
Global markets rallied this week as positive news on U.S. economic growth paired with upbeat earnings reports from technology bellwether Oracle to buoy optimism. Investors snapped up riskier assets on hopes of a quick resolution to the conflict in Libya and amid signs that the worst may be over in Japan. In Europe, the sealing of a eurozone bailout plan, added to the more upbeat mood of the week.
Keeping a cap on market gains were worries about continued Allied air strikes on Libya and uncertainty over the economic prospects for Portugal and Ireland. Concerns over the stability of Japan's Fukushima Daiichi nuclear power complex and about the overall economic impact of the March 11 earthquake and tsunami kept pressure on markets, particularly in Asia. The Japanese government pegged the recent earthquakes total economic damage at up to $300 billion.
Continued violence in the Middle East, which this week drew Israel and Syria further into the fold, pushed oil prices above $106 per barrel.
Global economic news
U.S. economy grew 3.1% in the fourth quarter
The U.S. economy grew more than had been estimated in the fourth quarter of 2010, according to revised figures from the U.S. Department of Commerce. The 3.1% annual rate of growth was led by a 4% rise in consumer spending. The 2010 U.S. economic growth rate of 2.9% was the countrys highest annual growth rate in five years. Corporate profits rose 29% last year, their largest annual gain since 1948.
Portugal's crisis deepens; prime minister resigns
Portugals political and economic crisis deepened as it came closer to an international bailout after the countrys parliament rejected a proposed austerity plan and the prime minister resigned. The cost of Portuguese borrowing hit a new high after the countrys debt was downgraded by two notches by Standard & Poors, to BBB from A, and Fitch cut its rating for Portugal to A-.
New eurozone bailout fund created
European finance ministers set up a new bailout fund that will be able to lend 500 billion ($710 billion) to eurozone member nations in need. The fund, which will require 80 billion in cash from the 17 eurozone countries, will replace the current temporary fund in 2013.
U.S. consumer sentiment down
Consumer sentiment in the United States fell more than expected in March on higher gasoline prices and in the wake of Japans earthquake and tsunami. The Thomson Reuters/University of Michigan Index of Consumer Sentiment fell to 67.5, its lowest reading since November 2009, from 77.5 in February.
U.S. new home sales hit record low
Sales of new single-family homes fell to a record low in February, with prices dipping to their lowest point since December 2003, according to a report from the Commerce Department. Home sales fell 16.9% in February from the previous month to a seasonally adjusted level of 250,000 units, the lowest since records began in 1963. February sales were down 28% from a year earlier.
U.S. existing home sales down 9.6%
Sales of existing, or previously occupied, U.S. homes slid 9.6% in February to their lowest level in almost nine years, the National Association of Realtors reported. The results were worse than forecast.
U.S. jobless claims fall
A trend of fewer first-time jobless claims continued in the week ended March 19, as unemployment benefits claims fell by 5,000 to 382,000. The four-week moving average fell to 385,250, its lowest level since July 2008. And, the total number of people continuing to receive jobless benefits declined by 2,000 to 3.72 million, the smallest amount since September 2008.
U.S. durable goods orders slow
U.S. orders for durable goods fell 0.9% in February, the third decline in four months for manufacturers orders for goods meant to last at least three years. Despite the recent downturn, year-to-date orders are 7.6% higher than for the same period last year.
Japanese consumer prices continue to slide
Japans core consumer price index fell 0.3% in February from a year earlier, the 24th consecutive month it has declined. Analysts are unsure what impact the March 11 earthquake and tsunami will have. Reconstruction spending could put pressure on prices to rise, possibly offset by weakening consumer spending.
Ireland's economy shrinks
Irelands gross domestic product shrank by 1.6% in the fourth quarter of 2010, according to the countrys Central Statistics Office. The countrys gross national product shrank 2.1% in 2010 after a 10.7% decline in 2009.
Eurozone recovery slows
Economic recovery in the eurozone continued in March, but at a slower pace, according to Markit Economics composite purchasing managers' index, which fell to 57.5 from 58.2 in February.
U.K. inflation reaches 4.4%
U.K. annual inflation rose at its fastest rate in more than two years in February, up from a 4% annual increase in January. Inflation now is at twice the Bank of Englands targeted 2% rate, putting pressure on the central bank to increase its interest rate. Contributing to higher inflation are increases in the cost of housing services such as water, electricity, gas, and other fuels.
Global corporate news
AT&T purchase of T-Mobile to be reviewed closely
AT&T has agreed to buy T-Mobile USA from Deutsche Telekom for $39 billion, creating the largest cellular company in the United States, and leaving only two other major U.S. competitors Verizon and Sprint Nextel. However, the proposed deal is expected to face very close scrutiny and a political battle in Washington, as politicians consider the impact on competition, costs, and consumers.
Oracle income rises after its Sun acquisition
Business software developer Oracle reported a 78% jump in income on a 37% rise in revenue for its fiscal third quarter. Results were boosted by its acquisition of Sun Microsystems a year ago.
Japans manufacturers begin to resume operations
Japans automakers had mixed plans for resuming production after the earthquake. Nissan Motor restarted its auto assembly operations and parts manufacturing this week, while Toyota Motor plans to resume production of three hybrid models next Monday, March 28. Honda Motor extended the suspension of its two domestic auto assembly operations through April 3 and canceled orders for May. One issue affecting these firms was inconsistent power supply for makers of computer chips used in the vehicles. Manufacturing stoppages could curb global auto production estimated at 75 million vehicles this year by 5 million units.
U.S. Federal Reserve denies Bank of America dividend increase
The Federal Reserve Board rejected a Bank of America proposal to increase its dividend in 2011. The central bank gave no reason for the rejection, which led observers to speculate that it had to do with results of the latest government stress tests for the nations 19 largest holding companies.
Inditex profit, sales rise on global expansion
Spains Inditex, the worlds largest fashion retailer, posted a 32% rise in net profit in 2010. It plans to add up to 500 stores to its 5,044 existing stores in 77 countries this year. Included are 120 new stores slated for China, where Inditex already owns 143 stores.
Best Buy hurt by slow sales, tough competition
Big-box electronics retailer Best Buy saw its fourth-quarter earnings fall 16% on weak computer and television sales and stiff competition from online retailers and discount stores.
Keeping a cap on market gains were worries about continued Allied air strikes on Libya and uncertainty over the economic prospects for Portugal and Ireland. Concerns over the stability of Japan's Fukushima Daiichi nuclear power complex and about the overall economic impact of the March 11 earthquake and tsunami kept pressure on markets, particularly in Asia. The Japanese government pegged the recent earthquakes total economic damage at up to $300 billion.
Continued violence in the Middle East, which this week drew Israel and Syria further into the fold, pushed oil prices above $106 per barrel.
Global economic news
U.S. economy grew 3.1% in the fourth quarter
The U.S. economy grew more than had been estimated in the fourth quarter of 2010, according to revised figures from the U.S. Department of Commerce. The 3.1% annual rate of growth was led by a 4% rise in consumer spending. The 2010 U.S. economic growth rate of 2.9% was the countrys highest annual growth rate in five years. Corporate profits rose 29% last year, their largest annual gain since 1948.
Portugal's crisis deepens; prime minister resigns
Portugals political and economic crisis deepened as it came closer to an international bailout after the countrys parliament rejected a proposed austerity plan and the prime minister resigned. The cost of Portuguese borrowing hit a new high after the countrys debt was downgraded by two notches by Standard & Poors, to BBB from A, and Fitch cut its rating for Portugal to A-.
New eurozone bailout fund created
European finance ministers set up a new bailout fund that will be able to lend 500 billion ($710 billion) to eurozone member nations in need. The fund, which will require 80 billion in cash from the 17 eurozone countries, will replace the current temporary fund in 2013.
U.S. consumer sentiment down
Consumer sentiment in the United States fell more than expected in March on higher gasoline prices and in the wake of Japans earthquake and tsunami. The Thomson Reuters/University of Michigan Index of Consumer Sentiment fell to 67.5, its lowest reading since November 2009, from 77.5 in February.
U.S. new home sales hit record low
Sales of new single-family homes fell to a record low in February, with prices dipping to their lowest point since December 2003, according to a report from the Commerce Department. Home sales fell 16.9% in February from the previous month to a seasonally adjusted level of 250,000 units, the lowest since records began in 1963. February sales were down 28% from a year earlier.
U.S. existing home sales down 9.6%
Sales of existing, or previously occupied, U.S. homes slid 9.6% in February to their lowest level in almost nine years, the National Association of Realtors reported. The results were worse than forecast.
U.S. jobless claims fall
A trend of fewer first-time jobless claims continued in the week ended March 19, as unemployment benefits claims fell by 5,000 to 382,000. The four-week moving average fell to 385,250, its lowest level since July 2008. And, the total number of people continuing to receive jobless benefits declined by 2,000 to 3.72 million, the smallest amount since September 2008.
U.S. durable goods orders slow
U.S. orders for durable goods fell 0.9% in February, the third decline in four months for manufacturers orders for goods meant to last at least three years. Despite the recent downturn, year-to-date orders are 7.6% higher than for the same period last year.
Japanese consumer prices continue to slide
Japans core consumer price index fell 0.3% in February from a year earlier, the 24th consecutive month it has declined. Analysts are unsure what impact the March 11 earthquake and tsunami will have. Reconstruction spending could put pressure on prices to rise, possibly offset by weakening consumer spending.
Ireland's economy shrinks
Irelands gross domestic product shrank by 1.6% in the fourth quarter of 2010, according to the countrys Central Statistics Office. The countrys gross national product shrank 2.1% in 2010 after a 10.7% decline in 2009.
Eurozone recovery slows
Economic recovery in the eurozone continued in March, but at a slower pace, according to Markit Economics composite purchasing managers' index, which fell to 57.5 from 58.2 in February.
U.K. inflation reaches 4.4%
U.K. annual inflation rose at its fastest rate in more than two years in February, up from a 4% annual increase in January. Inflation now is at twice the Bank of Englands targeted 2% rate, putting pressure on the central bank to increase its interest rate. Contributing to higher inflation are increases in the cost of housing services such as water, electricity, gas, and other fuels.
Global corporate news
AT&T purchase of T-Mobile to be reviewed closely
AT&T has agreed to buy T-Mobile USA from Deutsche Telekom for $39 billion, creating the largest cellular company in the United States, and leaving only two other major U.S. competitors Verizon and Sprint Nextel. However, the proposed deal is expected to face very close scrutiny and a political battle in Washington, as politicians consider the impact on competition, costs, and consumers.
Oracle income rises after its Sun acquisition
Business software developer Oracle reported a 78% jump in income on a 37% rise in revenue for its fiscal third quarter. Results were boosted by its acquisition of Sun Microsystems a year ago.
Japans manufacturers begin to resume operations
Japans automakers had mixed plans for resuming production after the earthquake. Nissan Motor restarted its auto assembly operations and parts manufacturing this week, while Toyota Motor plans to resume production of three hybrid models next Monday, March 28. Honda Motor extended the suspension of its two domestic auto assembly operations through April 3 and canceled orders for May. One issue affecting these firms was inconsistent power supply for makers of computer chips used in the vehicles. Manufacturing stoppages could curb global auto production estimated at 75 million vehicles this year by 5 million units.
U.S. Federal Reserve denies Bank of America dividend increase
The Federal Reserve Board rejected a Bank of America proposal to increase its dividend in 2011. The central bank gave no reason for the rejection, which led observers to speculate that it had to do with results of the latest government stress tests for the nations 19 largest holding companies.
Inditex profit, sales rise on global expansion
Spains Inditex, the worlds largest fashion retailer, posted a 32% rise in net profit in 2010. It plans to add up to 500 stores to its 5,044 existing stores in 77 countries this year. Included are 120 new stores slated for China, where Inditex already owns 143 stores.
Best Buy hurt by slow sales, tough competition
Big-box electronics retailer Best Buy saw its fourth-quarter earnings fall 16% on weak computer and television sales and stiff competition from online retailers and discount stores.
U.S. Economic News Week Ending March 18, 2011
The devastation of Japans magnitude-9 earthquake and tsunami dominated the news as engineers struggled to prevent a meltdown and the wide-scale release of radioactive materials at the crippled Fukushima Daiichi nuclear power plant in northeastern Japan. The nation coped with immense loss of life and destruction, with more than 6,500 confirmed dead and 10,000-plus missing. Close to 400,000 remained in shelters, tens of thousands remained without power or heat, and 1.6 million households lacked running water. It may take weeks to take full stock of the huge physical damage and the short- and long-term impact of the disaster on Japans economy, the worlds third largest.
On Friday, after the Japanese yen's rise in value, the Group of Seven nations staged a coordinated intervention in the foreign exchange market for the first time since 2000. The rise was seen as a significant threat to Japanese economic recovery, financial market stability, and global economic prospects. The move came after the yen hit a record high of ¥76.30 per U.S. dollar on Thursday. The intervention was intended to stabilize the yen at somewhat weaker levels. A stronger yen makes it more expensive for consumers elsewhere to buy Japanese-made goods, undermining demand for Japanese exports. The yen has been appreciating in part because Japanese companies, insurers, and investors are expected to repatriate large sums of cash from assets held overseas. The yen's rise came despite the Bank of Japan's move earlier in the week in which it pumped ¥15 trillion ($183 billion) into the countrys financial system and doubled the size of its asset-purchase program to ease the disasters economic impact. By 12:45 on Friday, the coordinated intervention witnessed some measure of initial success, weakening the yen to 81 per U.S. dollar.
Japans stock market was extremely volatile this week, with the Nikkei 225 Stock Average falling more than 16% Monday and Tuesday before rebounding somewhat Wednesday. Japanese stocks ended the week on an up note, after efforts to stabilize the yen were successful. Stock prices tumbled throughout Asia and the world while the price of safe-haven assets, such as U.S. Treasuries, rose. However, a declaration of ceasefire in Libya on Friday, in response to a United Nations Security Council resolution calling for military action, caused demand for safe-haven assets to soften. As a consequence, the prices of the 10-year U.S. Treasury note and 30-year U.S. Treasury bond rose sharply. The Libyan ceasefire sent stocks up and oil prices down, underscoring the weeks intense volatility.
The price of oil fell sharply early in the week, to $97 per barrel on anticipation of reduced short-term energy use in Japan, the worlds third-largest oil importer, as industrial production is expected to be reduced in the short term. Over the longer term, an economic resurgence is expected as Japan rebuilds. By early Friday, the price of oil rose above $102, as the chance of a long-term economic disruption, which would affect Japanese demand for oil, receded. However, the improved situation in Libya led to a sharp drop in oil prices, to $100 per barrel. All week, the world paid heightened attention to energy needs and alternatives, as dependence on Middle Eastern oil was weighed against the potentially catastrophic risks associated with nuclear power.
Global economic news
U.S. import prices rise sharply, core inflation stable
The price of goods imported into the United States rose 1.4% in February from January, as costs for energy, food and industrial supplies increased, the U.S. Department of Labor reported. Overall, prices were 8.5% higher than a year earlier. Excluding oil products, import prices were 3.5% higher than in February 2010. Meanwhile, U.S. consumer prices rose by 0.5% from January to February, and prices in February were 2.1% higher than a year earlier. The annual underlying inflation rate excluding energy and food was 1.1% in February.
U.S. jobless claims drop; four-week average lowest since 2008
The number of first-time claims made for unemployment insurance fell by 16,000 to 385,000 in the week ended March 12, the Labor Department reported. The four-week average of new claims fell 7,000, to its lowest level since July 2008.
U.S. factory production increases again
Production in U.S. factories increased in February for the sixth straight month, but overall industrial output declined for the first time since October because unseasonably warm weather reduced consumption of gas and electricity. Industrial production is 12% higher than in June 2009, but still 6% from its pre-recession peak in September 2007.
U.S. regional manufacturing gauge hits 27-year high
A gauge of manufacturing activity in the mid-Atlantic area rose in March to its highest level since January 1984. The Federal Reserve Bank of Philadelphias general business activity index jumped to 43.4 in March, from 35.9 in February. The Philadelphia Feds new orders measure rose to 40.3 in March, its highest since November 1983.
U.S. Federal Reserve reassures investors
In a volatile week, the U.S. Federal Reserve Board calmed the markets by upgrading its economic outlook and predicting that the inflationary impact of increased commodity prices would be transitory. The company predicted strong earnings growth for the quarter ended May 31 and was upbeat about revenue growth for the year.
U.S. housing starts fall
Housing starts in the United States fell in February to their slowest pace since April 2009. The drop in housing starts from January was the sharpest monthly plunge 22.5% since March 1984, according to figures released by the U.S. Department of Commerce.
Eurozone employment rises, output grows slightly
The number of people employed across the eurozone increased in the fourth quarter of 2010, the first such increase in two years, according to data released by Eurostat, the EUs statistics agency. Employment grew in Germany, France, and Italy, but fell in Spain and Portugal. Data on eurozone industrial output in January was positive as well. Industrial output grew 0.3% from December and 6.6% from January 2010, reported Eurostat.
Global corporate news
Disruption at Japanese automakers could have far-reaching impact
Production at various Japanese automakers was suspended for the week, and into next week in some cases, as the companies struggled with supply shortages, damages to their facilities, power outages, and in some cases, difficulties for employees in traveling to work. Toyota Motor, Honda Motor, Suzuki Motor, Mazda Motor, Nissan Motor, and Isuzu Motors were all affected by interruptions. In the United States, General Motors said Thursday that production at a plant in Louisiana would be interrupted next week because of a shortage of parts from Japan.
Berkshire Hathaway to buy Lubrizol for $9 billion
Berkshire Hathaway announced that it would purchase Lubrizol, a specialty chemical maker based in Ohio, for $9 billion in cash in one of the largest deals for Warren Buffett. Berkshire has $38 billion in cash available for such acquisitions.
U.S. Treasury 99% repaid for TARP funds
Six banks repaid the U.S. Department of the Treasury a total of $475 million in funds borrowed through the Troubled Asset Relief Program (TARP) this week. TARP was created in 2008 to help banks survive the credit crisis. To date, $244 billion of the $245 billion of money received through TARP has been repaid. The Treasury estimates that TARP bank programs will eventually generate a $20 billion profit for taxpayers.
FedEx has positive outlook
FedEx maintained a bullish outlook for revenue despite hurdles presented by Japans crisis and unrest in the Middle East and North Africa. FedExs profit for the quarter ended February 28 was down 4% from a year earlier because of harsh weather and rising fuel prices. FedEx is considered an economic bellwether because of the vast extent of its shipments.
Lufthansa returns to a profit
German airline Lufthansa earned a profit of 1.1 billion in 2010, after a loss of 34 million in 2009. Revenue for the airline rose 22% as passenger and cargo air traffic rose. Cost-cutting and higher ticket prices contributed to the profit.
Williams-Sonoma net profit up 28%
Williams-Sonoma, a seller of housewares and home-decor products, grew its profit by 28% on strength in its direct-to-consumer business, which includes catalog and Web sales.
On Friday, after the Japanese yen's rise in value, the Group of Seven nations staged a coordinated intervention in the foreign exchange market for the first time since 2000. The rise was seen as a significant threat to Japanese economic recovery, financial market stability, and global economic prospects. The move came after the yen hit a record high of ¥76.30 per U.S. dollar on Thursday. The intervention was intended to stabilize the yen at somewhat weaker levels. A stronger yen makes it more expensive for consumers elsewhere to buy Japanese-made goods, undermining demand for Japanese exports. The yen has been appreciating in part because Japanese companies, insurers, and investors are expected to repatriate large sums of cash from assets held overseas. The yen's rise came despite the Bank of Japan's move earlier in the week in which it pumped ¥15 trillion ($183 billion) into the countrys financial system and doubled the size of its asset-purchase program to ease the disasters economic impact. By 12:45 on Friday, the coordinated intervention witnessed some measure of initial success, weakening the yen to 81 per U.S. dollar.
Japans stock market was extremely volatile this week, with the Nikkei 225 Stock Average falling more than 16% Monday and Tuesday before rebounding somewhat Wednesday. Japanese stocks ended the week on an up note, after efforts to stabilize the yen were successful. Stock prices tumbled throughout Asia and the world while the price of safe-haven assets, such as U.S. Treasuries, rose. However, a declaration of ceasefire in Libya on Friday, in response to a United Nations Security Council resolution calling for military action, caused demand for safe-haven assets to soften. As a consequence, the prices of the 10-year U.S. Treasury note and 30-year U.S. Treasury bond rose sharply. The Libyan ceasefire sent stocks up and oil prices down, underscoring the weeks intense volatility.
The price of oil fell sharply early in the week, to $97 per barrel on anticipation of reduced short-term energy use in Japan, the worlds third-largest oil importer, as industrial production is expected to be reduced in the short term. Over the longer term, an economic resurgence is expected as Japan rebuilds. By early Friday, the price of oil rose above $102, as the chance of a long-term economic disruption, which would affect Japanese demand for oil, receded. However, the improved situation in Libya led to a sharp drop in oil prices, to $100 per barrel. All week, the world paid heightened attention to energy needs and alternatives, as dependence on Middle Eastern oil was weighed against the potentially catastrophic risks associated with nuclear power.
Global economic news
U.S. import prices rise sharply, core inflation stable
The price of goods imported into the United States rose 1.4% in February from January, as costs for energy, food and industrial supplies increased, the U.S. Department of Labor reported. Overall, prices were 8.5% higher than a year earlier. Excluding oil products, import prices were 3.5% higher than in February 2010. Meanwhile, U.S. consumer prices rose by 0.5% from January to February, and prices in February were 2.1% higher than a year earlier. The annual underlying inflation rate excluding energy and food was 1.1% in February.
U.S. jobless claims drop; four-week average lowest since 2008
The number of first-time claims made for unemployment insurance fell by 16,000 to 385,000 in the week ended March 12, the Labor Department reported. The four-week average of new claims fell 7,000, to its lowest level since July 2008.
U.S. factory production increases again
Production in U.S. factories increased in February for the sixth straight month, but overall industrial output declined for the first time since October because unseasonably warm weather reduced consumption of gas and electricity. Industrial production is 12% higher than in June 2009, but still 6% from its pre-recession peak in September 2007.
U.S. regional manufacturing gauge hits 27-year high
A gauge of manufacturing activity in the mid-Atlantic area rose in March to its highest level since January 1984. The Federal Reserve Bank of Philadelphias general business activity index jumped to 43.4 in March, from 35.9 in February. The Philadelphia Feds new orders measure rose to 40.3 in March, its highest since November 1983.
U.S. Federal Reserve reassures investors
In a volatile week, the U.S. Federal Reserve Board calmed the markets by upgrading its economic outlook and predicting that the inflationary impact of increased commodity prices would be transitory. The company predicted strong earnings growth for the quarter ended May 31 and was upbeat about revenue growth for the year.
U.S. housing starts fall
Housing starts in the United States fell in February to their slowest pace since April 2009. The drop in housing starts from January was the sharpest monthly plunge 22.5% since March 1984, according to figures released by the U.S. Department of Commerce.
Eurozone employment rises, output grows slightly
The number of people employed across the eurozone increased in the fourth quarter of 2010, the first such increase in two years, according to data released by Eurostat, the EUs statistics agency. Employment grew in Germany, France, and Italy, but fell in Spain and Portugal. Data on eurozone industrial output in January was positive as well. Industrial output grew 0.3% from December and 6.6% from January 2010, reported Eurostat.
Global corporate news
Disruption at Japanese automakers could have far-reaching impact
Production at various Japanese automakers was suspended for the week, and into next week in some cases, as the companies struggled with supply shortages, damages to their facilities, power outages, and in some cases, difficulties for employees in traveling to work. Toyota Motor, Honda Motor, Suzuki Motor, Mazda Motor, Nissan Motor, and Isuzu Motors were all affected by interruptions. In the United States, General Motors said Thursday that production at a plant in Louisiana would be interrupted next week because of a shortage of parts from Japan.
Berkshire Hathaway to buy Lubrizol for $9 billion
Berkshire Hathaway announced that it would purchase Lubrizol, a specialty chemical maker based in Ohio, for $9 billion in cash in one of the largest deals for Warren Buffett. Berkshire has $38 billion in cash available for such acquisitions.
U.S. Treasury 99% repaid for TARP funds
Six banks repaid the U.S. Department of the Treasury a total of $475 million in funds borrowed through the Troubled Asset Relief Program (TARP) this week. TARP was created in 2008 to help banks survive the credit crisis. To date, $244 billion of the $245 billion of money received through TARP has been repaid. The Treasury estimates that TARP bank programs will eventually generate a $20 billion profit for taxpayers.
FedEx has positive outlook
FedEx maintained a bullish outlook for revenue despite hurdles presented by Japans crisis and unrest in the Middle East and North Africa. FedExs profit for the quarter ended February 28 was down 4% from a year earlier because of harsh weather and rising fuel prices. FedEx is considered an economic bellwether because of the vast extent of its shipments.
Lufthansa returns to a profit
German airline Lufthansa earned a profit of 1.1 billion in 2010, after a loss of 34 million in 2009. Revenue for the airline rose 22% as passenger and cargo air traffic rose. Cost-cutting and higher ticket prices contributed to the profit.
Williams-Sonoma net profit up 28%
Williams-Sonoma, a seller of housewares and home-decor products, grew its profit by 28% on strength in its direct-to-consumer business, which includes catalog and Web sales.
U.S. Economic News Week Ending March 11, 2011
In a highly volatile week, markets fell broadly on a series of disturbing events. Renewed worries about Middle East oil flow disruptions combined with concerns about disappointing trade figures from Germany and China to pressure markets, and sovereign debt downgrades in Greece and Spain added a further element of risk that sent investors to safe havens such as U.S. Treasuries. The increased demand caused Treasury yields to fall sharply. Topping things off was a tsunami that hit Japan late Friday afternoon as Japan's stock market was about to close.
The tidal wave, which washed away cars, trucks, boats, and houses, was triggered by an earthquake with a magnitude of 8.9 centered 230 miles northeast of Tokyo. The quake, Japans largest ever and reportedly the fifth largest in the world since 1900, shook Tokyo's buildings and investors nerves. Tsunami warnings were issued for dozens of countries with shorelines along the Pacific Ocean. Wide-scale evacuations occurred in Hawaii. The full local and global economic impact of this disaster is not yet known.
Fears that oil production could be disrupted, along with the increased violence in Libya and new protests in Saudi Arabia, pushed the price of a barrel of crude oil above $106.
Gold prices dipped along with other commodities on concerns that global demand could drop if Chinese economic growth slows.
Global economic news
Greece, Spain see debt downgraded
Moodys Investors Service downgraded the sovereign debt rating of Spain and Greece this week. On Monday, Moodys cut Greeces credit rating by three levels, to "B1" with a negative outlook, from "Ba1." On Thursday, Moodys cut its rating for Spanish sovereign debt to "Aa2" with a negative outlook, from "Aa1." The news reignited fears that countries with high deficits might bring the eurozone into a new debt crisis.
Data show higher gas prices weigh on consumers
The Reuters/University of Michigan consumer sentiment index fell to its lowest level since October as recent turmoil in Libya left consumers more pessimistic about their current and future economic situation. The report also showed a rise in inflation expectations in line with the surge in gas prices. The rise in gas prices also seemed to chip away at retail sales in the month of February. While sales climbed at the fastest rate in four months, the increase was still smaller than expected.
U.S. trade deficit widens
The U.S. trade deficit widened to its highest level in seven months in January despite a record-high level of exports, as surging oil prices added significantly to the price of imports. The U.S. trade deficit jumped 15% to $46.34 billion in January from $40.26 billion in December, the U.S. Department of Commerce reported. The deficit came in much higher than the $41.5 billion shortfall that had been estimated by economists surveyed by Dow Jones Newswires. Higher prices for oil contributed to the growing trade gap along with strong consumer demand.
Trade balances affected by high oil, commodities prices
China and Germany surprised the financial world with unexpectedly weak trade reports this week.
China has largest trade deficit in seven years
Chinas $7.3 billion February trade deficit, its largest monthly deficit in seven years, resulted from a 2.4% increase in exports from a year earlier and a 19.4% rise in imports for the same period. Higher prices for commodities played a key role, with the average price for Chinas iron ore imports rising 63%. Oil and soybean costs also rose.
Germanys trade surplus shrinks
Germanys current account surplus fell to 7.2 billion in January from 19.3 billion in December. From January 2010, exports rose 24.2% and imports were up 24.1%.
Japan reports monthly trade deficit
Japan incurred its first monthly trade deficit in two years as its exports rose 2.9% in January while imports grew by 15.6%. Imports of petroleum products rose 38.6%, as the price of crude oil was 18.2% higher than the previous year.
Consumer prices rise in China, Germany
Chinas consumer prices rose 4.9% in February from a year earlier, exceeding the governments 4% inflation target for a fifth month. In Germany, consumer price inflation was at its highest in more than two years in February, reaching 2.1% annually. The rising cost of energy was a factor in both instances.
U.S. wholesale inventories and sales rise
U.S. wholesale inventories rose by 1.1% in January to a seasonally adjusted $387 billion, the highest level since July 2008, while sales rose by 3.4%. Since January 2010, inventories rose 11.9% while sales were 15.4% higher. These strong numbers reflect increased consumer spending as well as greater confidence among businesses.
Confidence grows among U.S. small companies
U.S. small companies were more confident in February than they have been in three years, according to the National Federation of Independent Business optimism index, which rose to its highest level since the recession began in December 2007.
Consumer debt rises overall; credit card debt eases
U.S. consumer credit rose in January at an annual rate of 2.5% while credit card debt fell to a six-year low, according to the U.S. Federal Reserve Board. Overall consumer credit reached $2.412 trillion, an increase of $5 billion. Revolving credit, or credit-card debt, fell by $4.2 billion to $795.5 billion, marking the twenty-eighth decline in credit card use in 29 months.
Global corporate news
Sales of luxury goods soars
German luxury carmakers Audi and BMW had highly profitable years in 2010, signaling that demand for luxury vehicles recovered after almost stalling in 2009. Audi doubled its annual profits in 2010 and improved its operating profit margin to 9.4% from 5.4%. BMW substantially raised its dividends and had a 19% increase in revenue.
EADS posts major profit
European aerospace firm European Aeronautic Defence & Space Co. (EADS) reported a fourth-quarter net profit of 355 million, a big improvement from a loss of 1.05 billion a year earlier. The maker of the Airbus, among other aircraft, benefited from cost savings, increased aircraft deliveries, and improved performance in non-Airbus divisions.
AIG repays $6.9 billion to U.S. Treasury
American International Group (AIG), one of the major recipients of the U.S. governments Troubled Asset Relief Program (TARP), repaid $6.9 billion, reducing the U.S. Treasury Departments preferred equity stake in AIG. To date, 70% of the $700 billion the government has disbursed through TARP has been repaid.
Coffee rivals Green Mountain, Starbucks team up
Green Mountain Coffee Roasters has agreed to sell Starbucks coffee and Tazo tea in its Keurig brewing system in the fall. Just two weeks ago, Green Mountain announced a deal to sell coffee from Starbucks' rival Dunkin Donuts. In 2010, Green Mountain sold 2.9 million Keurig cup portion packs, a 75% increase year over year.
AOL announces job cut
To streamline its businesses, AOL has begun laying off 20% of its work force with plans to eliminate 950 jobs in the United States and India. Last year, AOL cut about one-third of its work force.
The tidal wave, which washed away cars, trucks, boats, and houses, was triggered by an earthquake with a magnitude of 8.9 centered 230 miles northeast of Tokyo. The quake, Japans largest ever and reportedly the fifth largest in the world since 1900, shook Tokyo's buildings and investors nerves. Tsunami warnings were issued for dozens of countries with shorelines along the Pacific Ocean. Wide-scale evacuations occurred in Hawaii. The full local and global economic impact of this disaster is not yet known.
Fears that oil production could be disrupted, along with the increased violence in Libya and new protests in Saudi Arabia, pushed the price of a barrel of crude oil above $106.
Gold prices dipped along with other commodities on concerns that global demand could drop if Chinese economic growth slows.
Global economic news
Greece, Spain see debt downgraded
Moodys Investors Service downgraded the sovereign debt rating of Spain and Greece this week. On Monday, Moodys cut Greeces credit rating by three levels, to "B1" with a negative outlook, from "Ba1." On Thursday, Moodys cut its rating for Spanish sovereign debt to "Aa2" with a negative outlook, from "Aa1." The news reignited fears that countries with high deficits might bring the eurozone into a new debt crisis.
Data show higher gas prices weigh on consumers
The Reuters/University of Michigan consumer sentiment index fell to its lowest level since October as recent turmoil in Libya left consumers more pessimistic about their current and future economic situation. The report also showed a rise in inflation expectations in line with the surge in gas prices. The rise in gas prices also seemed to chip away at retail sales in the month of February. While sales climbed at the fastest rate in four months, the increase was still smaller than expected.
U.S. trade deficit widens
The U.S. trade deficit widened to its highest level in seven months in January despite a record-high level of exports, as surging oil prices added significantly to the price of imports. The U.S. trade deficit jumped 15% to $46.34 billion in January from $40.26 billion in December, the U.S. Department of Commerce reported. The deficit came in much higher than the $41.5 billion shortfall that had been estimated by economists surveyed by Dow Jones Newswires. Higher prices for oil contributed to the growing trade gap along with strong consumer demand.
Trade balances affected by high oil, commodities prices
China and Germany surprised the financial world with unexpectedly weak trade reports this week.
China has largest trade deficit in seven years
Chinas $7.3 billion February trade deficit, its largest monthly deficit in seven years, resulted from a 2.4% increase in exports from a year earlier and a 19.4% rise in imports for the same period. Higher prices for commodities played a key role, with the average price for Chinas iron ore imports rising 63%. Oil and soybean costs also rose.
Germanys trade surplus shrinks
Germanys current account surplus fell to 7.2 billion in January from 19.3 billion in December. From January 2010, exports rose 24.2% and imports were up 24.1%.
Japan reports monthly trade deficit
Japan incurred its first monthly trade deficit in two years as its exports rose 2.9% in January while imports grew by 15.6%. Imports of petroleum products rose 38.6%, as the price of crude oil was 18.2% higher than the previous year.
Consumer prices rise in China, Germany
Chinas consumer prices rose 4.9% in February from a year earlier, exceeding the governments 4% inflation target for a fifth month. In Germany, consumer price inflation was at its highest in more than two years in February, reaching 2.1% annually. The rising cost of energy was a factor in both instances.
U.S. wholesale inventories and sales rise
U.S. wholesale inventories rose by 1.1% in January to a seasonally adjusted $387 billion, the highest level since July 2008, while sales rose by 3.4%. Since January 2010, inventories rose 11.9% while sales were 15.4% higher. These strong numbers reflect increased consumer spending as well as greater confidence among businesses.
Confidence grows among U.S. small companies
U.S. small companies were more confident in February than they have been in three years, according to the National Federation of Independent Business optimism index, which rose to its highest level since the recession began in December 2007.
Consumer debt rises overall; credit card debt eases
U.S. consumer credit rose in January at an annual rate of 2.5% while credit card debt fell to a six-year low, according to the U.S. Federal Reserve Board. Overall consumer credit reached $2.412 trillion, an increase of $5 billion. Revolving credit, or credit-card debt, fell by $4.2 billion to $795.5 billion, marking the twenty-eighth decline in credit card use in 29 months.
Global corporate news
Sales of luxury goods soars
German luxury carmakers Audi and BMW had highly profitable years in 2010, signaling that demand for luxury vehicles recovered after almost stalling in 2009. Audi doubled its annual profits in 2010 and improved its operating profit margin to 9.4% from 5.4%. BMW substantially raised its dividends and had a 19% increase in revenue.
EADS posts major profit
European aerospace firm European Aeronautic Defence & Space Co. (EADS) reported a fourth-quarter net profit of 355 million, a big improvement from a loss of 1.05 billion a year earlier. The maker of the Airbus, among other aircraft, benefited from cost savings, increased aircraft deliveries, and improved performance in non-Airbus divisions.
AIG repays $6.9 billion to U.S. Treasury
American International Group (AIG), one of the major recipients of the U.S. governments Troubled Asset Relief Program (TARP), repaid $6.9 billion, reducing the U.S. Treasury Departments preferred equity stake in AIG. To date, 70% of the $700 billion the government has disbursed through TARP has been repaid.
Coffee rivals Green Mountain, Starbucks team up
Green Mountain Coffee Roasters has agreed to sell Starbucks coffee and Tazo tea in its Keurig brewing system in the fall. Just two weeks ago, Green Mountain announced a deal to sell coffee from Starbucks' rival Dunkin Donuts. In 2010, Green Mountain sold 2.9 million Keurig cup portion packs, a 75% increase year over year.
AOL announces job cut
To streamline its businesses, AOL has begun laying off 20% of its work force with plans to eliminate 950 jobs in the United States and India. Last year, AOL cut about one-third of its work force.
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