Financial markets were volatile this week, as many economic reports pointed to an anemic U.S. economic recovery and the drama over a possible Greek sovereign debt default continued to unfold. On Friday, European leaders eased investor tensions a bit when they pledged to support Greece if the nation approves austerity measures.
Mixed economic news dominated the headlines throughout much of the week. Positive indicators included strong orders for U.S. durable goods and an upbeat forecast by economic bellwether FedEx that pointed to the temporary impact of the earthquake in Japan and higher oil prices.
However, consumer confidence fell on both sides of the Atlantic. U.S. home sales fell while jobless claims rose, and economic expectations slid in Germany, Europes strongest economy.
The International Energy Agencys announcement that it would release 60 million barrels of oil from strategic reserves caused the price of crude oil to tumble below $90 per barrel while sending energy stocks downward. Relative to the yield on benchmark German bunds, the yields on bonds issued by Portugal, Spain, Italy, and Ireland all rose, reflecting heightened risk. Against this backdrop, U.S. Treasury securities rallied, and Treasury yields fell.
Global economic news
EU leaders promise aid to Greece
European Union leaders promised to help Greece avoid a debt default as long as Greek Prime Minister George Papandreou pushes through a package of budget cuts next week. Leaders pledged to do whatever it takes to stabilize the eurozone economy. Greece has been in talks with European and international officials over 5.5 billion ($7.9 billion) in austerity measures as a necessary step to receiving its next quarterly disbursement on its existing loan as well as securing a second aid package. Greece will now have to get 78 billion of austerity measures through parliament.
U.S. Federal Reserve Board lowers growth forecast
The U.S. Federal Reserve Board lowered its forecasts for economic growth and employment in 2011 and 2012. The Fed now projects economic growth of 2.7% to 2.9% in 2011, down from 3.1% to 3.3%. It currently predicts an unemployment rate of 8.6% to 8.9% in the final quarter of this year, compared with a rate of 8.4% to 8.7% projected in April. However, the Fed noted that several factors holding back growth are temporary, including the impact of higher energy prices and disruptions to manufacturing caused by Japans earthquake.
Japan posts near-record trade deficit
Japan recorded its second-largest trade deficit ever in May, as the nation continued to feel the aftereffects of its March earthquake and tsunami and subsequent disruption to exports. Higher fuel costs caused the price of imports to rise. Despite Japans recent struggles, many analysts expect the economy to resume growth in the July-to-September quarter, because industrial output has started to show signs of improvement.
Italian banks trading halted
Trading in Italian banks was suspended Friday after a sharp drop in stock prices. It is rumored that several Italian banks could fail a Europe-wide stress test in July. Moodys Investors Service also warned that some Italian banks face possible debt rating downgrades.
U.S. durable goods rebound
A 1.9% rebound in orders for long-lasting manufactured goods in May, reported by the U.S. Department of Commerce, gave hope that recent economic weakness would turn out to be temporary. Durable goods orders had fallen 2.7% in April after the March 11 earthquake and tsunami in Japan had caused disruptions in the supply of automobile and electronics components.
U.S. first-quarter gross domestic product revised up to 1.9%
The U.S. economy grew slightly faster in the first quarter of 2011 than had been previously estimated. The Commerce Department revised its GDP growth figure to an inflation-adjusted annualized rate of 1.9% from its previous estimate of 1.8%.
U.S. home sales fall further
The National Association of Realtors reported that both existing and new home sales slowed in May. Sales of previously occupied homes in the United States fell 3.8% from April to their lowest level in six months. Purchases of new U.S. houses fell 2.1% from April, according to the Commerce Department. However, preliminary figures showed a jump in contract signings, a trend that points to a possible pickup in future sales.
U.S. jobless claims up
Initial claims for unemployment benefits by U.S. workers rose by 9,000 to a seasonally adjusted 429,000 in the week ended June 18. The four-week moving average of new claims remained unchanged from the previous weeks revised figure of 426,250.
U.S. consumer confidence drops
U.S. consumer confidence fell in the period ended June 19 for the first time in five weeks, according to the Bloomberg Consumer Comfort Index, which dropped to -44.9 from -44.0 a week earlier. A high unemployment rate, higher food costs, and lower home values all contributed.
Eurozone consumer confidence slips
Consumers in the 17 countries that use the euro were slightly less confident in June, according to an early estimate from the European Commissions monthly survey. The measure of confidence slipped to -10.0 from -9.9 in May. Both readings were better than Aprils -11.9.
Eurozone economies contract overall
Germany and France were the only eurozone nations in which private-sector activity grew in June. Most of the remaining 15 nations had economic contractions for the first time since November 2009. Output by both manufacturing and services firms slowed, sending the Markit eurozone Purchasing Managers Composite Index down to 53.6 in June from 55.8 in May.
German business confidence rises; economic expectations fall
German business confidence improved in June, its first move upward since February, according to German research institute Ifo. Business confidence reached 114.5, up from 114.2 in May. Another report showed economic expectations fell much more than expected in June. The Center for European Economic Research, ZEWs widely watched index fell to -9.0 in June from a revised 3.1 in May. A decline to -4.1 had been forecast.
Global corporate news
FedEx posts sharply better profit, issues positive forecast
FedEx reported a 33% growth in its quarterly profit and forecast annual 2012 earnings above Wall Street expectations. Because of the worlds largest air-cargo carriers extensive reach, it is seen as a bellwether of global trade. While acknowledging the short-term impact of higher oil prices, poor weather, and Japans earthquake, FedEx forecasts a 3% rise in U.S. gross domestic product in 2012, after 2.5% growth in 2011, and a 4.3% rise in U.S. industrial production in 2012 after a 4.2% increase in 2011.
Oracle posts strong profits, but softness in hardware
Technology giant Oracle posted a 36% rise in profits and a 13% growth in revenue for its fiscal fourth quarter. However, declining hardware product sales a new area for Oracle as a result of its Sun Microsystems acquisition last year gave investors cause for concern. Meanwhile, Oracles traditional software business thrived, with new sales up 19%.
Lennar earnings down 65%
Homebuilder Lennar reported a 65% decrease in its second-quarter profit, exceeding very low expectations, as oversupply and foreclosures weighed on home prices and sales. Lennars overall revenue fell by 6.1%, and its revenue from home sales was off by 6.5%.
Kroger profit higher
Supermarket chain Kroger posted a 16% increase in its fiscal first-quarter earnings, surpassing estimates, as the company benefited from cost controls and sales growth. Kroger increased sales 11% on low prices and a strategy of building customer loyalty.
Supreme Court sides with Wal-Mart on lawsuit
The Supreme Court threw out an enormous employment-discrimination lawsuit against Wal-Mart Stores, ruling that 1.6 million female alleged victims had too little in common to form a single class of plaintiffs. The decision on the largest class-action lawsuit in U.S. history is expected to affect other employment class-action suits.
Monday, June 27, 2011
U.S. Economic News Week Ending June 17 2011
Uncertainty over a possible second Greek bailout or a sovereign debt default loomed large over global markets through the week. Violence in the streets of Athens, a crippling strike by two major unions, and the potential toppling of Greek prime minister George Papandreou all heightened investors' concerns. A Greek sovereign debt default could mean huge losses for creditors and a potential new global credit crunch, depending on market reaction.
U.S. economic news was mixed. There were fewer new jobless claims, and May retail sales, while registering a slight decline, were still better than expected. Inflation rose, although core prices increased less than 2% annually. Housing activity picked up, but homebuilder confidence declined. The index of U.S. leading economic indicators rose, but consumer confidence fell. Regional gauges of manufacturing activity in the mid-Atlantic region and New York State turned negative for the first time since last fall. Volatility, as measured by the Chicago Board Options Exchange volatility index (VIX), reached a fresh three-month high amid heightened uncertainty. Oil prices eased on the prospect of an economic downturn and lower demand for energy.
Global economic news
Greek debt default concerns drive markets down
As the prospects of a Greek debt default rise, the repercussions are being felt globally, with stocks affected in Europe, Asia, and the United States. The cost of insuring Greek debt soared to new highs, the euro weakened, the price of crude oil futures dipped, and banks with significant exposure to Greek government debt were warned by ratings agencies. On Friday, worries eased somewhat as Germany appeared to be ready to avoid a confrontation that would force private investors to shoulder some of the debt burden. This weekend, European officials will hold critical talks on securing 12 billion in outside aid to avoid a Greek default.
U.S. CPI continues to rise; core prices still tame
U.S. consumer prices rose in May for the month and the year, according to the monthly report from the U.S. Department of Labor. Consumer prices rose by 3.6% from May 2010, but core inflation, after stripping out volatile energy and food prices, rose just 1.5% annually. The price rise from April to May was 0.2% overall, and 0.3% for core inflation. Driving inflation higher are rises in import prices, caused by higher commodity costs as well as wage inflation in emerging economies, including China, India, and Brazil. Most economic forecasters believe that the soft U.S. labor market will hold back inflation pressures.
U.S. leading economic indicators rise
The index of U.S. leading economic indicators rose 0.8% in May, after declining 0.4% in April, according to the Conference Board. Economists had forecast a rise of just 0.3%. Eight of ten leading indicators were higher. The report points to a pickup in economic growth by late in 2011.
Consumer confidence dips
The Reuters/University of Michigan preliminary estimate of U.S. consumer confidence in June fell to 71.8 from 74.3 in May. The gauge was expected to slip to 74.
Regional manufacturing gauges tumble
Gauges of manufacturing activity in New York State and the Philadelphia area were sharply lower in June. The Empire State Index fell to -7.8 from 11.9 in May, according to the Federal Reserve Bank of New York. Economists had expected a reading of 13.3. The Philadelphia Feds index of current activity fell to -7.7 in June from 3.9 in May, its lowest reading in 31 months.
U.S. housing data send mixed messages
U.S. housing starts rose 3.5% from a month earlier in May, according to the U.S. Department of Commerce. Newly issued building permits rose 8.7%, much higher than the 4.8% that had been forecast. However, confidence among U.S. homebuilders fell in June to its lowest level in nine months. The National Association of Home Builders/Wells Fargo sentiment index fell to 13 from 16 in May. It had reached a low of 8 in January 2009. Readings below 50 indicate poor economic conditions.
U.S. jobless claims ease, but remain elevated
Initial claims for unemployment benefits by U.S. workers fell by 16,000 to a seasonally adjusted 414,000 in the week ended June 11. The four-week moving average of new claims remained unchanged at 424,750. A weekly claims figure of below 400,000 is generally seen as an indication that the economy is adding more jobs than it is losing.
U.S. retail sales dip
Retail sales slipped in May for the first time in 11 months, declining 0.2%, the Commerce Department reported. However, the results were better than expected. Sales of big-ticket items, such as cars and appliances, declined. One reason for the decline in autos and parts was supply disruptions as a result of the March earthquake and tsunami in Japan. Excluding autos, retail sales climbed 0.3% in May.
Global corporate news
Honda forecasts sharp drop in profit
Honda Motor predicts that its annual profits will fall by more than half from last year as a result of the strong yen and production disruptions resulting from the March 11 earthquake in Japan. Hondas announcement follows one by Toyota Motor, which last week forecast a 31% drop in profit.
French banks warned by Moodys
Moodys Investors Service warned Frances three largest banks, BNP Paribas SA, Credit Agricole SA, and Socit Gnrale SA, that they could have their debt rating downgraded in the event of any Greek debt restructuring as a result of their exposure to Greek debt. Overall, Frances banking sector holds $56.7 billion worth of Greek sovereign bonds, according to the Bank for International Settlements (BIS).
Capital One to buy ING Direct USA
Capital One Financial will buy the online banking business of ING Groep NV, according to reports. The deal, which has not been announced officially, calls for Capital One to pay $6.2 billion in cash and $2.8 billion in stock for ING Direct USA. ING was ordered by the European Commission to sell the business by 2013 as part of a bailout package it received during the financial crisis in 2008.
Energy Transfer to buy Southern Union
Energy Transfer will create the largest natural gas pipeline company in the United States with its planned $4.2 billion acquisition of Southern Union. The deal would combine Energy Transfers strong position in natural gas production areas with Southerns access to markets.
Pandora IPO hits a sour note
Pandora Medias closely watched initial public offering rose at first on Wednesday but closed 17% below its IPO price on Thursday. The stock tumbled after a key analyst forecast that the Internet music firms earnings would be squeezed by high royalties, a loss of listeners to mobile devices, and tough competition from technology giants Apple, Google, and Amazon.
Research in Motion cuts profit forecast
Canadian Blackberry-maker Research in Motion slashed its annual profit forecast and said it would begin laying off employees as a result of losing market share and revenue to rivals in the competitive smartphone industry. For the quarter ended May 28, Blackberry sales declined for the first quarter since 2005.
U.S. economic news was mixed. There were fewer new jobless claims, and May retail sales, while registering a slight decline, were still better than expected. Inflation rose, although core prices increased less than 2% annually. Housing activity picked up, but homebuilder confidence declined. The index of U.S. leading economic indicators rose, but consumer confidence fell. Regional gauges of manufacturing activity in the mid-Atlantic region and New York State turned negative for the first time since last fall. Volatility, as measured by the Chicago Board Options Exchange volatility index (VIX), reached a fresh three-month high amid heightened uncertainty. Oil prices eased on the prospect of an economic downturn and lower demand for energy.
Global economic news
Greek debt default concerns drive markets down
As the prospects of a Greek debt default rise, the repercussions are being felt globally, with stocks affected in Europe, Asia, and the United States. The cost of insuring Greek debt soared to new highs, the euro weakened, the price of crude oil futures dipped, and banks with significant exposure to Greek government debt were warned by ratings agencies. On Friday, worries eased somewhat as Germany appeared to be ready to avoid a confrontation that would force private investors to shoulder some of the debt burden. This weekend, European officials will hold critical talks on securing 12 billion in outside aid to avoid a Greek default.
U.S. CPI continues to rise; core prices still tame
U.S. consumer prices rose in May for the month and the year, according to the monthly report from the U.S. Department of Labor. Consumer prices rose by 3.6% from May 2010, but core inflation, after stripping out volatile energy and food prices, rose just 1.5% annually. The price rise from April to May was 0.2% overall, and 0.3% for core inflation. Driving inflation higher are rises in import prices, caused by higher commodity costs as well as wage inflation in emerging economies, including China, India, and Brazil. Most economic forecasters believe that the soft U.S. labor market will hold back inflation pressures.
U.S. leading economic indicators rise
The index of U.S. leading economic indicators rose 0.8% in May, after declining 0.4% in April, according to the Conference Board. Economists had forecast a rise of just 0.3%. Eight of ten leading indicators were higher. The report points to a pickup in economic growth by late in 2011.
Consumer confidence dips
The Reuters/University of Michigan preliminary estimate of U.S. consumer confidence in June fell to 71.8 from 74.3 in May. The gauge was expected to slip to 74.
Regional manufacturing gauges tumble
Gauges of manufacturing activity in New York State and the Philadelphia area were sharply lower in June. The Empire State Index fell to -7.8 from 11.9 in May, according to the Federal Reserve Bank of New York. Economists had expected a reading of 13.3. The Philadelphia Feds index of current activity fell to -7.7 in June from 3.9 in May, its lowest reading in 31 months.
U.S. housing data send mixed messages
U.S. housing starts rose 3.5% from a month earlier in May, according to the U.S. Department of Commerce. Newly issued building permits rose 8.7%, much higher than the 4.8% that had been forecast. However, confidence among U.S. homebuilders fell in June to its lowest level in nine months. The National Association of Home Builders/Wells Fargo sentiment index fell to 13 from 16 in May. It had reached a low of 8 in January 2009. Readings below 50 indicate poor economic conditions.
U.S. jobless claims ease, but remain elevated
Initial claims for unemployment benefits by U.S. workers fell by 16,000 to a seasonally adjusted 414,000 in the week ended June 11. The four-week moving average of new claims remained unchanged at 424,750. A weekly claims figure of below 400,000 is generally seen as an indication that the economy is adding more jobs than it is losing.
U.S. retail sales dip
Retail sales slipped in May for the first time in 11 months, declining 0.2%, the Commerce Department reported. However, the results were better than expected. Sales of big-ticket items, such as cars and appliances, declined. One reason for the decline in autos and parts was supply disruptions as a result of the March earthquake and tsunami in Japan. Excluding autos, retail sales climbed 0.3% in May.
Global corporate news
Honda forecasts sharp drop in profit
Honda Motor predicts that its annual profits will fall by more than half from last year as a result of the strong yen and production disruptions resulting from the March 11 earthquake in Japan. Hondas announcement follows one by Toyota Motor, which last week forecast a 31% drop in profit.
French banks warned by Moodys
Moodys Investors Service warned Frances three largest banks, BNP Paribas SA, Credit Agricole SA, and Socit Gnrale SA, that they could have their debt rating downgraded in the event of any Greek debt restructuring as a result of their exposure to Greek debt. Overall, Frances banking sector holds $56.7 billion worth of Greek sovereign bonds, according to the Bank for International Settlements (BIS).
Capital One to buy ING Direct USA
Capital One Financial will buy the online banking business of ING Groep NV, according to reports. The deal, which has not been announced officially, calls for Capital One to pay $6.2 billion in cash and $2.8 billion in stock for ING Direct USA. ING was ordered by the European Commission to sell the business by 2013 as part of a bailout package it received during the financial crisis in 2008.
Energy Transfer to buy Southern Union
Energy Transfer will create the largest natural gas pipeline company in the United States with its planned $4.2 billion acquisition of Southern Union. The deal would combine Energy Transfers strong position in natural gas production areas with Southerns access to markets.
Pandora IPO hits a sour note
Pandora Medias closely watched initial public offering rose at first on Wednesday but closed 17% below its IPO price on Thursday. The stock tumbled after a key analyst forecast that the Internet music firms earnings would be squeezed by high royalties, a loss of listeners to mobile devices, and tough competition from technology giants Apple, Google, and Amazon.
Research in Motion cuts profit forecast
Canadian Blackberry-maker Research in Motion slashed its annual profit forecast and said it would begin laying off employees as a result of losing market share and revenue to rivals in the competitive smartphone industry. For the quarter ended May 28, Blackberry sales declined for the first quarter since 2005.
Friday, June 10, 2011
U.S. Economic News Week Ending June 10 2011
Stocks fell around the world this week amid growing concern that the economy is slowing. In the United States, the Dow Jones Industrial Average extended its longest weekly slump in more than eight years, while the Standard & Poor's 500 Stock Index has now been in decline for six straight weeks.
Global economic news
U.S. trade deficit narrows; China's surplus less than expected
The U.S. trade deficit unexpectedly narrowed amid record exports and a plunge in auto and oil imports. The gap shrank 6.7% to $43.7 billion, the lowest since December. Purchases of goods from Japan dropped by a record $3 billion in the aftermath of the earthquake and tsunami. Stocks rallied after the news, on hopes that trade would help boost economic growth. Meanwhile, China reported a less-than-expected $13.1 billion trade surplus in May as surging imports signaled that the nation's demand may support global growth while adding pressure for higher interest rates.
ECB signals rate increase; BOE keeps rates on hold
The European Central Bank signaled it is likely to raise interest rates in July. ECB President Jean-Claude Trichet said "strong vigilance" is needed to contain inflation. The bank raised rates in April for the first time in nearly three years and was the fifth major central bank in the developed world to begin raising rates from the lowest levels of the financial crisis. The Bank of England meanwhile kept its main rate at 0.5% for the twenty-seventh month in a row. Eurozone inflation was running at 2.7% in May, well above the ECB's target of just under 2%.
Bank of Korea raises rates; Indonesia rates unchanged
The Bank of Korea raised interest rates for a third time this year to rein in inflation, which has exceeded its target range, and to curb record household debt. The bank increased the benchmark seven-day repurchase rate to 3.25% from 3%. Korea's rate increase followed one by Thailand on June 1, as job growth and costlier energy caused consumer price gains to exceed the Bank of Korea's 4% ceiling. That was Thailand's fourth rate increase this year. Also this week, the Bank of Indonesia left its reference rate at 6.75%, as a strengthening currency helped contain inflation.
ECB opposes Greek bailout
The European Central Bank this week maintained its resistance to participating in a bailout of Greece. The Greek budget shortfall may amount to $130 billion through 2014. Governments have been trying to come up with a new aid package by a European summit on June 23 to June 24. The International Monetary Fund has threatened to withhold its share of Greece's bailout until governments that guarantee the financing needs for the next 12 months are covered. The IMF was due to turn over 3.3 billion this month.
Japan's GDP contracts 3.5%
Japan's economy contracted 3.5% in the three months ended March 31, less than the 3.7% contraction reported last month. The better-than-expected number is seen as a sign that the economic slump caused by the earthquake was not as deep as expected. An upward revision in inventories helped limit the depth of the downturn. Producer prices in the country rose for an eighth month in May, in line with the rise in energy and raw material costs. Prices companies pay for energy and unfinished goods rose 2.2% from a year earlier. On a more upbeat note, an index of the current business conditions, released by Japan's Cabinet Office, rose to 36 in May from 28.3 in April. However, readings under 50 indicate more pessimism than optimism.
Eurozone economy grows 0.8%
The eurozone economy grew 0.8% in the first quarter, up from 0.3% in the previous three months, according to the European Union's statistics office Eurostat. In year-on-year terms, GDP growth was 2.5%, up from 1.9% in the last three months of 2010. Investment, as well as household and government consumption, drove growth in the first quarter. On the flip side, European industrial orders declined more than expected in March, led by a drop in demand for durable consumer goods. Orders fell 1.8% from February. The drop suggests that the eurozone recovery may struggle to gather strength after having expanded at a solid pace in the first quarter.
U.S. jobless claims rise
Initial jobless claims unexpectedly increased last week, rising 1,000 to 427,000 in the week ended June 4. The numbers indicate that the labor market is still struggling.
Global corporate news
Toyota forecasts 31% profit drop
Toyota Motor forecast a 31% drop in annual profit after Japan's earthquake disrupted production and sales while the yen strengthened. The company said net income may fall to ¥280 billion in the 12 months ending March 31, 2012, from the¥408 billion that was expected by analysts.
J. Crew posts Q1 loss
J. Crew posted a loss for its fiscal first quarter because of costs related to its March buyout the company was taken private in early March in a $3 billion acquisition by a group of investors. In addition, the apparel retailer's bottom line was hurt by markdowns and promotions.
Global economic news
U.S. trade deficit narrows; China's surplus less than expected
The U.S. trade deficit unexpectedly narrowed amid record exports and a plunge in auto and oil imports. The gap shrank 6.7% to $43.7 billion, the lowest since December. Purchases of goods from Japan dropped by a record $3 billion in the aftermath of the earthquake and tsunami. Stocks rallied after the news, on hopes that trade would help boost economic growth. Meanwhile, China reported a less-than-expected $13.1 billion trade surplus in May as surging imports signaled that the nation's demand may support global growth while adding pressure for higher interest rates.
ECB signals rate increase; BOE keeps rates on hold
The European Central Bank signaled it is likely to raise interest rates in July. ECB President Jean-Claude Trichet said "strong vigilance" is needed to contain inflation. The bank raised rates in April for the first time in nearly three years and was the fifth major central bank in the developed world to begin raising rates from the lowest levels of the financial crisis. The Bank of England meanwhile kept its main rate at 0.5% for the twenty-seventh month in a row. Eurozone inflation was running at 2.7% in May, well above the ECB's target of just under 2%.
Bank of Korea raises rates; Indonesia rates unchanged
The Bank of Korea raised interest rates for a third time this year to rein in inflation, which has exceeded its target range, and to curb record household debt. The bank increased the benchmark seven-day repurchase rate to 3.25% from 3%. Korea's rate increase followed one by Thailand on June 1, as job growth and costlier energy caused consumer price gains to exceed the Bank of Korea's 4% ceiling. That was Thailand's fourth rate increase this year. Also this week, the Bank of Indonesia left its reference rate at 6.75%, as a strengthening currency helped contain inflation.
ECB opposes Greek bailout
The European Central Bank this week maintained its resistance to participating in a bailout of Greece. The Greek budget shortfall may amount to $130 billion through 2014. Governments have been trying to come up with a new aid package by a European summit on June 23 to June 24. The International Monetary Fund has threatened to withhold its share of Greece's bailout until governments that guarantee the financing needs for the next 12 months are covered. The IMF was due to turn over 3.3 billion this month.
Japan's GDP contracts 3.5%
Japan's economy contracted 3.5% in the three months ended March 31, less than the 3.7% contraction reported last month. The better-than-expected number is seen as a sign that the economic slump caused by the earthquake was not as deep as expected. An upward revision in inventories helped limit the depth of the downturn. Producer prices in the country rose for an eighth month in May, in line with the rise in energy and raw material costs. Prices companies pay for energy and unfinished goods rose 2.2% from a year earlier. On a more upbeat note, an index of the current business conditions, released by Japan's Cabinet Office, rose to 36 in May from 28.3 in April. However, readings under 50 indicate more pessimism than optimism.
Eurozone economy grows 0.8%
The eurozone economy grew 0.8% in the first quarter, up from 0.3% in the previous three months, according to the European Union's statistics office Eurostat. In year-on-year terms, GDP growth was 2.5%, up from 1.9% in the last three months of 2010. Investment, as well as household and government consumption, drove growth in the first quarter. On the flip side, European industrial orders declined more than expected in March, led by a drop in demand for durable consumer goods. Orders fell 1.8% from February. The drop suggests that the eurozone recovery may struggle to gather strength after having expanded at a solid pace in the first quarter.
U.S. jobless claims rise
Initial jobless claims unexpectedly increased last week, rising 1,000 to 427,000 in the week ended June 4. The numbers indicate that the labor market is still struggling.
Global corporate news
Toyota forecasts 31% profit drop
Toyota Motor forecast a 31% drop in annual profit after Japan's earthquake disrupted production and sales while the yen strengthened. The company said net income may fall to ¥280 billion in the 12 months ending March 31, 2012, from the¥408 billion that was expected by analysts.
J. Crew posts Q1 loss
J. Crew posted a loss for its fiscal first quarter because of costs related to its March buyout the company was taken private in early March in a $3 billion acquisition by a group of investors. In addition, the apparel retailer's bottom line was hurt by markdowns and promotions.
Friday, June 3, 2011
U.S. Economic News Week Ending June 3, 2011
This was a sobering week of economic news as reports repeatedly signaled a slowing global economy. In the United States, the unemployment rate rose, job creation slowed, home prices dipped, and consumer confidence fell, all trends that reflect a struggle to maintain economic growth. On the brighter side globally, German jobless numbers shrank to a record low, prospects for a Greek bailout improved, and Canada’s economy grew at a healthy rate in the first quarter. However, numerous other indicators pointed downward, including a slowdown in manufacturing activity and in private sector growth within the eurozone.
Stocks were volatile throughout the week as investors reacted to the economic news, and tumbled after the disappointing Friday morning jobs report. Investors embraced the safety of U.S. Treasuries and that caused the yield on 10-year Treasury notes to dip below 3%. As recently as early April, the 10-year U.S. Treasury note yielded 3.60%.
Global economic news
U.S. jobs growth slows, unemployment up in May
Far fewer U.S. jobs were created last month than had been expected. Only 54,000 jobs were added to the U.S. economy for the month, according to the U.S. Department of Labor’s monthly jobs report. The consensus expectation among economists was for 160,000 new jobs to have been created. The unemployment rate rose to 9.1% from 9.0%. A slight decrease, to 8.9%, had been forecast. The report also revealed that in May 45% of unemployed Americans had been out of work for more than six months.
The numbers were disappointing, even after a preview had been provided by the private-sector jobs report released Wednesday by payroll services giant ADP, which found a growth of only 36,000 jobs in May in its survey, far fewer than had been expected. Weekly jobless claims also fell by 6,000 to a seasonally adjusted 422,000 during the week ended May 28. The four-week moving average of new claims dropped by 14,000 to 425,500. Despite the improvements, the numbers concern economists, because the weekly claims figure remains above 400,000, which is seen as a threshold indicator of the health of the job market.
Prospects improve for Greek bailout
Optimism rose this week that a new package of financial aid would be available for Greece, as Germany considered dropping a push to have Greek bonds rescheduled. For weeks, Germany had argued that private investors in Greek bonds should bear part of the burden of any new bailout package. Senior eurozone officials reportedly agreed in principle to a new three-year aid program for Greece. The agreement comes after Moody's downgraded Greek debt another three notches to "Caa1" from "B1" and warned that extended fiscal austerity would likely deepen and prolong recession. Moody's also cut the ratings of eight Greek banks on Friday.
Eurozone manufacturing growth wanes
The Markit Eurozone Manufacturing Purchasing Managers’ Index fell to 54.6, a seven-month low, from 58 in April. This was the index’s sharpest drop since November 2008. Additionally, the final May reading for the Markit Eurozone Composite Output Index, which measures private-sector business activity, fell to 55.8 in May from 57.8 in April.
U.S. home prices slide again
U.S. home prices fell 4.2% in the first quarter, reaching their lowest levels since 2002, according to the Standard & Poor's/Case-Shiller Home Price Indices. Homebuyers were apparently affected by uncertain job prospects amid persistently high unemployment. A high level of foreclosures continues to weigh on home sales and prices.
Consumer confidence falls in the United States
U.S. consumer confidence fell to a reading of 60.8, from 66.0 in April, according to the Conference Board consumer confidence index, amid pessimism about job prospects. The Chicago Institute for Supply Management recorded a sharp drop in its business barometer, to 56.6 in May from 67.6 in April. The May reading was the index’s lowest since November 2009.
Moody’s warns of possible U.S. debt downgrade
In a signal to the U.S. government, Moody’s Investors Service warned that it might lower the U.S. government’s credit rating if Congress fails to increase the nation’s debt limit in the coming weeks. The warning serves as a reminder of what is at stake if a budget stalemate persists. One consequence would be higher interest rates at a time when the U.S. economic recovery is showing renewed vulnerability.
Moody’s may downgrade Japan’s debt rating
Moody’s warned that it might lower its sovereign debt rating for Japan, as that country continues to struggle with deflation, flat economic growth, and high government debt. The tsunami and earthquake on March 11 added to existing problems, likely tipping Japan into a double-dip recession.
German jobless hits record low
Germany’s jobless rate reached a new low in May, with a 7% unemployment rate, down slightly from 7.1% in April, and the lowest unemployment rate since records were first kept in 1999.
Canadian economy rolls forward
Canada’s economy grew at a 3.9% annualized pace in the first quarter of 2011, more than twice the rate of that of growth in the United States, Canada’s largest trading partner. The Canadian economy benefited from businesses replenishing inventories and investing more to remain competitive. However, both consumer and government spending were weak.
Global corporate news
Japanese, U.S. auto sales reflect parts shortages
Auto sales declined in both the United States and Japan in May, hurt in part by the widespread shortage of parts after the severe disruptions caused by the March 11 earthquake and tsunami. In Japan, May auto sales fell by 38% from a year earlier. However, the decline in vehicle sales varied sharply from one carmaker to the next. Toyota Motor’s vehicle sales dropped 57%, Honda Motor fell 35%, and Nissan Motor’s sales slipped just 16%.
In the United States, vehicle sales slipped slightly. However, while Ford Motor and General Motors’ sales were fairly flat, Chrysler Group had a 10% rise in sales, and Hyundai Motor’s sales soared more than 20% as its fuel-efficient, relatively low-priced vehicles rose in popularity, and the Korean automaker benefited from shortages at Japanese firms Toyota and Honda.
American retailers post mixed results
Retailers registered mixed results in May. Costco reported a 13% increase in May for stores open for more than a year, aided by gasoline sales and favorable foreign exchange rates. Macy’s also reported robust numbers, with strong results across the board, including upscale Bloomingdales stores and its online operations. Upscale retailers Saks and Nordstrom both reported a healthy increase in sales. Among retailers with disappointing results were Target, Victoria’s Secret, and JCPenney.
Groupon to file IPO
Social buying web site Groupon filed to go public with an IPO that could value the company at as much as $20 billion. On Thursday, the two-and-a-half-year-old e-commerce company, filed to go public, looking for raise up to $750 million. Groupon has grown rapidly but has incurred huge losses, and faces impending competition from Internet giants Google and Facebook. The IPO comes on the back of LinkedIn's successful IPO in late May.
Nokia issues profit warning
Nokia, the world’s largest mobile phone maker, warned that its core business might not earn a profit this quarter, as the Finnish company faces rigorous competition from rivals Apple and Google, whose phones — particularly smartphones — and operating platforms are surging in popularity.
Apple adds clarity by offering glimpse at iCloud
Apple said it would announce next week a new Internet service called iCloud that would allow people to gain access to music, photos, and videos on multiple devices, including computers and cell phones, without needing to sync those devices. Apple has signed contracts with major music labels to license their recordings. The pre-announcement was unusual for Apple, which usually remains tightlipped about new products until they are officially unveiled.
Stocks were volatile throughout the week as investors reacted to the economic news, and tumbled after the disappointing Friday morning jobs report. Investors embraced the safety of U.S. Treasuries and that caused the yield on 10-year Treasury notes to dip below 3%. As recently as early April, the 10-year U.S. Treasury note yielded 3.60%.
Global economic news
U.S. jobs growth slows, unemployment up in May
Far fewer U.S. jobs were created last month than had been expected. Only 54,000 jobs were added to the U.S. economy for the month, according to the U.S. Department of Labor’s monthly jobs report. The consensus expectation among economists was for 160,000 new jobs to have been created. The unemployment rate rose to 9.1% from 9.0%. A slight decrease, to 8.9%, had been forecast. The report also revealed that in May 45% of unemployed Americans had been out of work for more than six months.
The numbers were disappointing, even after a preview had been provided by the private-sector jobs report released Wednesday by payroll services giant ADP, which found a growth of only 36,000 jobs in May in its survey, far fewer than had been expected. Weekly jobless claims also fell by 6,000 to a seasonally adjusted 422,000 during the week ended May 28. The four-week moving average of new claims dropped by 14,000 to 425,500. Despite the improvements, the numbers concern economists, because the weekly claims figure remains above 400,000, which is seen as a threshold indicator of the health of the job market.
Prospects improve for Greek bailout
Optimism rose this week that a new package of financial aid would be available for Greece, as Germany considered dropping a push to have Greek bonds rescheduled. For weeks, Germany had argued that private investors in Greek bonds should bear part of the burden of any new bailout package. Senior eurozone officials reportedly agreed in principle to a new three-year aid program for Greece. The agreement comes after Moody's downgraded Greek debt another three notches to "Caa1" from "B1" and warned that extended fiscal austerity would likely deepen and prolong recession. Moody's also cut the ratings of eight Greek banks on Friday.
Eurozone manufacturing growth wanes
The Markit Eurozone Manufacturing Purchasing Managers’ Index fell to 54.6, a seven-month low, from 58 in April. This was the index’s sharpest drop since November 2008. Additionally, the final May reading for the Markit Eurozone Composite Output Index, which measures private-sector business activity, fell to 55.8 in May from 57.8 in April.
U.S. home prices slide again
U.S. home prices fell 4.2% in the first quarter, reaching their lowest levels since 2002, according to the Standard & Poor's/Case-Shiller Home Price Indices. Homebuyers were apparently affected by uncertain job prospects amid persistently high unemployment. A high level of foreclosures continues to weigh on home sales and prices.
Consumer confidence falls in the United States
U.S. consumer confidence fell to a reading of 60.8, from 66.0 in April, according to the Conference Board consumer confidence index, amid pessimism about job prospects. The Chicago Institute for Supply Management recorded a sharp drop in its business barometer, to 56.6 in May from 67.6 in April. The May reading was the index’s lowest since November 2009.
Moody’s warns of possible U.S. debt downgrade
In a signal to the U.S. government, Moody’s Investors Service warned that it might lower the U.S. government’s credit rating if Congress fails to increase the nation’s debt limit in the coming weeks. The warning serves as a reminder of what is at stake if a budget stalemate persists. One consequence would be higher interest rates at a time when the U.S. economic recovery is showing renewed vulnerability.
Moody’s may downgrade Japan’s debt rating
Moody’s warned that it might lower its sovereign debt rating for Japan, as that country continues to struggle with deflation, flat economic growth, and high government debt. The tsunami and earthquake on March 11 added to existing problems, likely tipping Japan into a double-dip recession.
German jobless hits record low
Germany’s jobless rate reached a new low in May, with a 7% unemployment rate, down slightly from 7.1% in April, and the lowest unemployment rate since records were first kept in 1999.
Canadian economy rolls forward
Canada’s economy grew at a 3.9% annualized pace in the first quarter of 2011, more than twice the rate of that of growth in the United States, Canada’s largest trading partner. The Canadian economy benefited from businesses replenishing inventories and investing more to remain competitive. However, both consumer and government spending were weak.
Global corporate news
Japanese, U.S. auto sales reflect parts shortages
Auto sales declined in both the United States and Japan in May, hurt in part by the widespread shortage of parts after the severe disruptions caused by the March 11 earthquake and tsunami. In Japan, May auto sales fell by 38% from a year earlier. However, the decline in vehicle sales varied sharply from one carmaker to the next. Toyota Motor’s vehicle sales dropped 57%, Honda Motor fell 35%, and Nissan Motor’s sales slipped just 16%.
In the United States, vehicle sales slipped slightly. However, while Ford Motor and General Motors’ sales were fairly flat, Chrysler Group had a 10% rise in sales, and Hyundai Motor’s sales soared more than 20% as its fuel-efficient, relatively low-priced vehicles rose in popularity, and the Korean automaker benefited from shortages at Japanese firms Toyota and Honda.
American retailers post mixed results
Retailers registered mixed results in May. Costco reported a 13% increase in May for stores open for more than a year, aided by gasoline sales and favorable foreign exchange rates. Macy’s also reported robust numbers, with strong results across the board, including upscale Bloomingdales stores and its online operations. Upscale retailers Saks and Nordstrom both reported a healthy increase in sales. Among retailers with disappointing results were Target, Victoria’s Secret, and JCPenney.
Groupon to file IPO
Social buying web site Groupon filed to go public with an IPO that could value the company at as much as $20 billion. On Thursday, the two-and-a-half-year-old e-commerce company, filed to go public, looking for raise up to $750 million. Groupon has grown rapidly but has incurred huge losses, and faces impending competition from Internet giants Google and Facebook. The IPO comes on the back of LinkedIn's successful IPO in late May.
Nokia issues profit warning
Nokia, the world’s largest mobile phone maker, warned that its core business might not earn a profit this quarter, as the Finnish company faces rigorous competition from rivals Apple and Google, whose phones — particularly smartphones — and operating platforms are surging in popularity.
Apple adds clarity by offering glimpse at iCloud
Apple said it would announce next week a new Internet service called iCloud that would allow people to gain access to music, photos, and videos on multiple devices, including computers and cell phones, without needing to sync those devices. Apple has signed contracts with major music labels to license their recordings. The pre-announcement was unusual for Apple, which usually remains tightlipped about new products until they are officially unveiled.
Wednesday, June 1, 2011
U.S. Economic News Week Ending May 27, 2011
Global stocks clawed their way higher this week, despite reports of weak economic data and worries over Greek debt woes. Weak U.S. economic reports capped gains among U.S. indices and sent the U.S. dollar broadly lower. The U.S. currency hit an all-time low against the Swiss franc, which historically has been seen as a safe-haven currency. Stocks also got a boost Friday from positive comments from the Group of Eight leading industrialized nations, who said the "global recovery is gaining strength and is becoming self-sustained." The group added that a strengthening global economy will pave the way to cuts in the debt built up during the recession.
Global economic news
U.S. corporations report best profits ever
American companies reported their best profits ever in the third quarter, according to a report released this week by the U.S. Department of Commerce. Profits came in at an annual rate of $1.659 trillion in the third quarter. This is the highest figure recorded since the government began keeping track over 60 years ago. Profits have now grown for seven consecutive quarters, and as a share of gross domestic product, they now account for 11.7% of GDP. However, after-tax corporate profits unexpectedly contracted in the first quarter to record their first decline in more than two years.
U.S. data underline a still-shaky recovery
The U.S. economy slowed considerably in the first three months of the year. Gross domestic product was reported to be 1.8% which was below the 2.1% expected by economists, as consumers cut spending and commodity prices increased. In April consumer spending slowed, increasing 0.4% less than the 0.5% increase in March. That decline is seen as the result of rising gas and grocery prices, which have taken a bite out of discretionary spending budgets. New claims for unemployment benefits unexpectedly climbed to 424,000 last week, in another sign that the job markets are improving at a painfully slow rate. Other reports show new homes sales rose 7.1% in April from March, but home prices continued to fall in March as a glut of foreclosures pressured home values. Also underlining the sluggishness of this year's economic growth, the U.S. manufacturing sector cooled as orders for durable goods fell 3.6% in April and a measure of business investment declined. On a more positive note however, consumer sentiment at the end of May was better than expected according to the Thomson Reuters/University of Michigan survey.
Greece's debt woes rattle investors
Worries over Greece's ability to pay off its debt and reach budget deficit goals were rampant this week. As European policymakers warned of the risk of a Greek debt rescheduling, the euro fell to a record low against the Swiss franc and weakened against the dollar. Investors are fearful that Greece will have a difficult time implementing needed austerity measures because the government's main opposition party is against such a move.
Japan experiences inflation for first time in 25 months
Japan's consumer prices rose in April for the first time in 25 months. The increases came after global energy and food costs rose and retailers suffered product shortages in the aftermath of a record earthquake and tsunami that caused the economy to shrink in the first quarter. Consumer prices, excluding fresh food, rose an annual 0.6%.
Fitch Ratings lowers Japan rating
Fitch Ratings lowered its outlook for Japan's debt to negative from stable. The rating agency cited the risks associated with the nuclear power plant crisis and noted that the country's gross debt ratio is the highest of any country it tracks.
German economy grows 1.5%
Germany's gross domestic product rose 1.5% in the first quarter from the previous three months, the fastest growth since the second quarter of 2010. Exports advanced 2.3%, and construction spending jumped 6.2%. Meanwhile, German business confidence was unchanged in May according to the Ifo institute's business climax index, which is based on a survey of 7,000 executives.
U.K. economy grows by 0.5% in first quarter
The U.K. economy grew by 0.5% in the first quarter and 1.8% from a year earlier helped by export growth that outweighed the biggest slump in company investment and consumer spending in almost two years. Exports rose 3.7% in the quarter, and trade added a record 1.7 percentage points to gross domestic product growth.
France's Lagarde announces IMF bid
France's Finance Minister Christine Lagarde officially declared her candidacy to replace Dominique Strauss-Kahn as the managing director of the International Monetary Fund. Her bid began a global race for the position.
Global corporate news
Costco's profits up 6%; Polo Ralph Lauren's dip 36%; RBC profit increase 13%
Costco Wholesale's third-quarter earnings rose 6% as strong same-store sales growth and expense controls more than offset a slight decline in margins. Revenue jumped 16% as the largest U.S. warehouse-style retailer by revenue benefited from stronger foreign currencies in addition to a bulk-selling approach that appeals to cost-conscious consumers.
Polo Ralph Lauren's fourth-quarter profit dropped 36% amid higher costs and lower sales in Japan. The company, whose brands include American Living, Chaps, Club Monaco, said earnings fell to $73.2 million for the quarter. Polo, like other apparel manufacturers and retailers, faced rising production costs, including a jump in the price of cotton.
Royal Bank of Canada's fiscal second-quarter profit jumped 13%. The increase reflected its home-market dominance in retail banking, wealth management, and insurance. The bank raised its quarterly dividend by 8%, the first increase since the third quarter of fiscal year 2007.
Global economic news
U.S. corporations report best profits ever
American companies reported their best profits ever in the third quarter, according to a report released this week by the U.S. Department of Commerce. Profits came in at an annual rate of $1.659 trillion in the third quarter. This is the highest figure recorded since the government began keeping track over 60 years ago. Profits have now grown for seven consecutive quarters, and as a share of gross domestic product, they now account for 11.7% of GDP. However, after-tax corporate profits unexpectedly contracted in the first quarter to record their first decline in more than two years.
U.S. data underline a still-shaky recovery
The U.S. economy slowed considerably in the first three months of the year. Gross domestic product was reported to be 1.8% which was below the 2.1% expected by economists, as consumers cut spending and commodity prices increased. In April consumer spending slowed, increasing 0.4% less than the 0.5% increase in March. That decline is seen as the result of rising gas and grocery prices, which have taken a bite out of discretionary spending budgets. New claims for unemployment benefits unexpectedly climbed to 424,000 last week, in another sign that the job markets are improving at a painfully slow rate. Other reports show new homes sales rose 7.1% in April from March, but home prices continued to fall in March as a glut of foreclosures pressured home values. Also underlining the sluggishness of this year's economic growth, the U.S. manufacturing sector cooled as orders for durable goods fell 3.6% in April and a measure of business investment declined. On a more positive note however, consumer sentiment at the end of May was better than expected according to the Thomson Reuters/University of Michigan survey.
Greece's debt woes rattle investors
Worries over Greece's ability to pay off its debt and reach budget deficit goals were rampant this week. As European policymakers warned of the risk of a Greek debt rescheduling, the euro fell to a record low against the Swiss franc and weakened against the dollar. Investors are fearful that Greece will have a difficult time implementing needed austerity measures because the government's main opposition party is against such a move.
Japan experiences inflation for first time in 25 months
Japan's consumer prices rose in April for the first time in 25 months. The increases came after global energy and food costs rose and retailers suffered product shortages in the aftermath of a record earthquake and tsunami that caused the economy to shrink in the first quarter. Consumer prices, excluding fresh food, rose an annual 0.6%.
Fitch Ratings lowers Japan rating
Fitch Ratings lowered its outlook for Japan's debt to negative from stable. The rating agency cited the risks associated with the nuclear power plant crisis and noted that the country's gross debt ratio is the highest of any country it tracks.
German economy grows 1.5%
Germany's gross domestic product rose 1.5% in the first quarter from the previous three months, the fastest growth since the second quarter of 2010. Exports advanced 2.3%, and construction spending jumped 6.2%. Meanwhile, German business confidence was unchanged in May according to the Ifo institute's business climax index, which is based on a survey of 7,000 executives.
U.K. economy grows by 0.5% in first quarter
The U.K. economy grew by 0.5% in the first quarter and 1.8% from a year earlier helped by export growth that outweighed the biggest slump in company investment and consumer spending in almost two years. Exports rose 3.7% in the quarter, and trade added a record 1.7 percentage points to gross domestic product growth.
France's Lagarde announces IMF bid
France's Finance Minister Christine Lagarde officially declared her candidacy to replace Dominique Strauss-Kahn as the managing director of the International Monetary Fund. Her bid began a global race for the position.
Global corporate news
Costco's profits up 6%; Polo Ralph Lauren's dip 36%; RBC profit increase 13%
Costco Wholesale's third-quarter earnings rose 6% as strong same-store sales growth and expense controls more than offset a slight decline in margins. Revenue jumped 16% as the largest U.S. warehouse-style retailer by revenue benefited from stronger foreign currencies in addition to a bulk-selling approach that appeals to cost-conscious consumers.
Polo Ralph Lauren's fourth-quarter profit dropped 36% amid higher costs and lower sales in Japan. The company, whose brands include American Living, Chaps, Club Monaco, said earnings fell to $73.2 million for the quarter. Polo, like other apparel manufacturers and retailers, faced rising production costs, including a jump in the price of cotton.
Royal Bank of Canada's fiscal second-quarter profit jumped 13%. The increase reflected its home-market dominance in retail banking, wealth management, and insurance. The bank raised its quarterly dividend by 8%, the first increase since the third quarter of fiscal year 2007.
U.S. Economic News Week Ending May 20, 2011
Worrisome U.S. economic data and lackluster earnings reports kept stocks range bound this week. While news that the U.S. Federal Reserve Board was in no hurry to tighten monetary policy gave stocks a boost midweek, investors remained wary of stock buying, given new evidence of the slow pace of global economic recovery.
Global economic news
Mixed U.S. economic data worry investors
In the United States a government report showed a larger-than-expected drop in jobless claims. The report bolstered optimism about the economy. However, other reports were less favorable. Manufacturing growth in the Philadelphia region unexpectedly declined in May to the slowest pace in seven months. New home construction fell 10.6% in April from March. Construction of homes and apartments dropped 10.6% in April to a seasonally adjusted annual rate of 523,000 compared with a month earlier, according to the U.S. Department of Commerce. From the same month a year ago, home starts are down 23.9%.
BOJ maintains monetary policy
The Bank of Japan voted to maintain its monetary policy — a ¥30 trillion credit program and a ¥10 trillion asset purchase fund and to keep its key overnight rate at zero to 0.1%. The BOJ kept the policy intact despite reports earlier in the week that showed Japan's economy contracted at a much-worse-than-expected 3.7% annualized rate in the January-March period. That decline tipped the country into a recession as the March 11 earthquake and tsunami caused declines in consumer spending, business investment, and private sector inventories.
BOE leaves rates unchanged
The Bank of England left interest rates unchanged this month with the majority of policymakers warning that tightening policy now could damp consumer spending and hurt the recovery. In the May 5 minutes of the bank's monetary policy committee meeting released Wednesday, members said an increase could adversely affect consumer confidence, which has been adversely affected by government spending cuts and accelerating inflation. Underlining the fragile nature of the recovery, U.K. unemployment claims have risen at the fastest pace since January 2010. Unemployment fell 36,000 to 2.46 million people in the quarter through March.
Global corporate news
Moody's downgrades debt of Australia's largest banks
Moody's Investors Services downgraded the debt ratings of Australia's largest lenders to "Aa2" from their previous rating of "Aa1," one notch below Moody's top rating. The downgrade comes as ratings firms worldwide step up reviews of the global banking system following the 2008 subprime mortgage crisis and subsequent backlash against the ratings industry.
LinkedIn's stocks soars after IPO
LinkedIn's stock soared to a high of $122.70 on its first day of trading. The professional networking company's IPO priced at $45 per share a day earlier.
Gap slashes year outlook
The Gap slashed its full-year earnings outlook and reported that its net income fell 23% to $233 million for the quarter ended April 30. The company attributed its results to faster-than-expected cost increases; the Gap said it is spending about 20% more than a year ago on each item it plans to sell.
TEPCO reports ¥1.27 trillion loss
Tokyo Electric Power (TEPCO) sustained a net loss of ¥1.27 trillion for the fiscal year ended in March after incurring massive costs to battle the Fukushima Daiichi nuclear accident. The company warned of a significant deterioration of its financial position and raised doubts about its ability to continue as a "going concern."
Liberty Media in bid to buy Barnes & Noble
Liberty Media proposed to buy Barnes & Noble for $1 billion. Barnes & Noble, the largest bookstore chain, put itself up for sale last summer but has struggled to find a buyer amid a deteriorating outlook for booksellers.
Global economic news
Mixed U.S. economic data worry investors
In the United States a government report showed a larger-than-expected drop in jobless claims. The report bolstered optimism about the economy. However, other reports were less favorable. Manufacturing growth in the Philadelphia region unexpectedly declined in May to the slowest pace in seven months. New home construction fell 10.6% in April from March. Construction of homes and apartments dropped 10.6% in April to a seasonally adjusted annual rate of 523,000 compared with a month earlier, according to the U.S. Department of Commerce. From the same month a year ago, home starts are down 23.9%.
BOJ maintains monetary policy
The Bank of Japan voted to maintain its monetary policy — a ¥30 trillion credit program and a ¥10 trillion asset purchase fund and to keep its key overnight rate at zero to 0.1%. The BOJ kept the policy intact despite reports earlier in the week that showed Japan's economy contracted at a much-worse-than-expected 3.7% annualized rate in the January-March period. That decline tipped the country into a recession as the March 11 earthquake and tsunami caused declines in consumer spending, business investment, and private sector inventories.
BOE leaves rates unchanged
The Bank of England left interest rates unchanged this month with the majority of policymakers warning that tightening policy now could damp consumer spending and hurt the recovery. In the May 5 minutes of the bank's monetary policy committee meeting released Wednesday, members said an increase could adversely affect consumer confidence, which has been adversely affected by government spending cuts and accelerating inflation. Underlining the fragile nature of the recovery, U.K. unemployment claims have risen at the fastest pace since January 2010. Unemployment fell 36,000 to 2.46 million people in the quarter through March.
Global corporate news
Moody's downgrades debt of Australia's largest banks
Moody's Investors Services downgraded the debt ratings of Australia's largest lenders to "Aa2" from their previous rating of "Aa1," one notch below Moody's top rating. The downgrade comes as ratings firms worldwide step up reviews of the global banking system following the 2008 subprime mortgage crisis and subsequent backlash against the ratings industry.
LinkedIn's stocks soars after IPO
LinkedIn's stock soared to a high of $122.70 on its first day of trading. The professional networking company's IPO priced at $45 per share a day earlier.
Gap slashes year outlook
The Gap slashed its full-year earnings outlook and reported that its net income fell 23% to $233 million for the quarter ended April 30. The company attributed its results to faster-than-expected cost increases; the Gap said it is spending about 20% more than a year ago on each item it plans to sell.
TEPCO reports ¥1.27 trillion loss
Tokyo Electric Power (TEPCO) sustained a net loss of ¥1.27 trillion for the fiscal year ended in March after incurring massive costs to battle the Fukushima Daiichi nuclear accident. The company warned of a significant deterioration of its financial position and raised doubts about its ability to continue as a "going concern."
Liberty Media in bid to buy Barnes & Noble
Liberty Media proposed to buy Barnes & Noble for $1 billion. Barnes & Noble, the largest bookstore chain, put itself up for sale last summer but has struggled to find a buyer amid a deteriorating outlook for booksellers.
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