U.S. economic news for the week ended August 5, 2011

Global markets went into a tailspin this week as investors returned their focus to the myriad signs of slowing global growth and the spread of the eurozone debt crisis. Fallout from the debt crisis in Europe, the political standoff on the U.S. government's borrowing limit, and concerns about slower U.S. and global growth sent central banks around the world into crisis mode, cutting interest rates, intervening to support their currencies, and buying bonds in an effort to protect their economies from the spreading crises.

Investors also went into crisis mode, dumping any asset considered risky. On Thursday the Dow Jones Industrial Average dropped 512 points, and the Standard & Poor's 500 Stock Index lost 4.8%. On Friday a better-than-expected U.S. jobs number helped calm market fears. Throughout the week, gold rallied, hitting an intraday record of $1,684.90 per ounce on Thursday, as investors sought a hedge against global market turmoil.

Gloom set in midweek, despite a last-minute deal by U.S. lawmakers to raise the debt ceiling, a measure that allowed the United States to avoid default. Worries that Europe's debt crisis would soon spread to Italy and Spain, whose yields soared to euro-era highs this week, exacerbated market fears, pushed the European Central Bank into action, and sent investors seeking the safety of U.S. Treasuries, whose yields fell to the lowest level of the year.

U.S. and global economic news

U.S. lawmakers agree on deal to raise debt limits, cut spending
On Tuesday President Barack Obama signed a long-debated debt deal that raised the U.S. debt limit and cuts spending. The bill increases the government borrowing limit by $2.4 trillion and cuts $917 billion in federal spending. Moody Investors Service and Fitch Ratings said they would keep the United States at their top "AAA" rating but with a negative outlook. They warned that downgrades were possible if lawmakers fail to enact debt reduction measures and if the economy weakens.

BOJ and SNB intervene to support currencies
The Bank of Japan and Swiss National Bank both intervened in currency markets to stem the rise of their currencies. The BOJ sold yen on Thursday. The move caused the currency to weaken as much as 4% against the U.S. dollar after rising some 5% against the U.S. currency in July. The Bank of Japan also expanded an asset-purchase fund that includes government bonds, real estate investment trusts, and corporate debt to ¥15 trillion from ¥10 trillion. Additionally, it boosted by ¥5 trillion a program aimed at encouraging banks to lend. The SNB unexpectedly cut interest rates and said it would inject $65 billion to stem the franc's record-breaking gains against the euro and the dollar. The Swiss franc has gained about 35% against the U.S. dollar in the past year.

ECB resumes bond buying
After being absent from the market for 18 weeks, the European Central Bank resumed bond purchases and will offer banks more cash in an effort to stop the region's debt crisis from spreading to Italy and Spain, whose yields soared to levels unseen since the euro was introduced. The ECB kept its benchmark interest rate at 1.5%. European officials are essentially trying to build a firewall around these third- and fourth-largest economies to avoid their being forced to seek external aid.

U.S. economy adds more jobs than expected
The U.S. economy added more jobs than expected in July, and the unemployment rate edged down. Nonfarm payrolls rose by 117,000 last month, and payroll data for the previous two months were revised higher by a total of 56,000. The unemployment rate dropped to 9.1% in July from 9.2% in June. Economists had forecast jobs would rise by 75,000 and the unemployment rate would remain at 9.2%.

Turkey cuts rates
Turkey's central bank lowered its key interest rate to a record low of 5.75%, while the Bank of England kept its key rate at 0.5%.

U.S. consumer spending flat; factory activity slumps
U.S. consumer spending was essentially flat in June, falling 0.2%, the biggest drop since September 2009. Personal income increased 0.1%, while wages and salaries that fuel consumer spending declined slightly. The Institute for Supply Management gauge of factory activity showed that the pace of manufacturing slowed sharply in July.

U.S. and global corporate news

Toyota's profit drops 99%; GM sees income double
Toyota Motor's profit fell 99% as it grappled with the yen's surge and crippled output. General Motors' second-quarter profits nearly doubled, as the company sold more vehicles globally and was able to charge more for cars and trucks in the United States.

Comcast, Dunkin, P&G, and LinkedIn report profits
Comcast profits rose 16% as it lost fewer pay-TV customers and sales grew at NBC Universal. Dunkin' Brands profits fell 1% as sales declines at Baskin-Robbins masked growth at Dunkin Donuts and abroad. Proctor & Gamble's fiscal fourth-quarter profit jumped 15% as sales grew across the world, and LinkedIn's second-quarter profit rose 5.1% on strong revenue growth.