U.S. economic news for the week ended July 9, 2010

U.S. stock markets were able to snap their seven-day losing streak, gaining nearly 5% by week's end, as investors looked enthusiastically to the kickoff next week of second-quarter earnings season. The gains came as the International Monetary Fund boosted its global growth outlook and U.S. retail sales soared to their strongest levels in four years.

U.S. economic news

Retailers record strong growth; jobless claims fall; service sector growth slows
News that U.S. retail sales are growing at the fastest pace in four years added to positive investor sentiment this week. The International Council of Shopping Centers said that sales probably expanded at an average monthly rate of 4% in the first five months of the retail year that began January 31. Other data were consistent with signs of a gradual improvement in labor market conditions. Initial unemployment insurance claims fell 21,000 last week, to 454,000.

The U.S. service sector grew more slowly in June as business leaders worried about the state of the labor market, according to the Institute for Supply Management's overall index of nonmanufacturing activity. The Institute's non-manufacturing employment index moved to 49.7 from 50.4, indicating a contraction within the sector.

U.S. and global corporate news
 
State Street earnings upgrade kicks off second-quarter enthusiasm
State Street kicked off the earnings season enthusiasm this week when it said it will report a second-quarter operating profit that is well above forecasts, putting it on track to hit its full year guidance. The company said that its results were helped by "momentum" in its servicing fee revenue as well as improvement in trading-services fee revenue. Official earnings will be reported on July 20.

China renews Google license
Google shares surged on Friday after the Chinese government renewed a license Google needed to continue to use its Chinese Web address. The renewal came after Google made a compromise with Chinese regulators and will enable Google to continue to provide Web search and local products to users in China . The dispute began in January after Google announced it would no longer comply with China 's self-censorship rules because of the government tightening free speech limits and a series of cyber attacks that Google said originated in China .

Total to buy UTS
France 's Total agreed to buy UTS energy for $1.42 billion as it sought to boost its Canadian oil sands portfolio.

Merck to cut 15,000 jobs
Merck will close eight research labs and eight manufacturing plants as part of a previously announced plan to reduce operations after it acquired Schering Plough last year. The cuts are part of a plan to reduce 15%, or about 15,000 jobs, of the combined company's work force following the acquisition.

Global economic news

IMF ups world growth forecast
The International Monetary Fund said the world economy will likely grow faster than expected, but as major risks remain the pace of growth is likely to slow. The IMF raised its global growth forecast to 4.6% from the 4.2% projection made in April.

CEBS releases stress test details
The Committee of European Banking Supervisors (CEBS) released details on "stress tests" for 91 European banks. The CEBS tests are designed to assess how banks will be able to absorb losses on loans and government bonds. It laid out the key features included in these tests that will be carried out by the CEBS in cooperation with the European Central Bank. The results are scheduled to be published on July 23. Lenders that account for 65% of the EU banking industry will be tested. Regulators are relying on the tests to restore public confidence in banks amid concerns that some lenders do not have enough capital to withstand a default by a European country.

Canada creates more jobs than expected
Canada created five times more jobs than expected in June, and its jobless rate fell to 7.9%, the lowest since January 2009. The country has now restored most of the jobs lost since 2008. This week the International Monetary Fund called the job market one of the strongest contributors to the Canadian recovery.

BOE, ECB keep interest rates unchanged
The Bank of England and European Central Bank kept interest rates unchanged this week. The BOE also kept its bond stimulus plan in place as it tries to prevent the economy from falling into recession during the country's biggest budget squeeze since World War II. ECB President Jean-Claude Trichet said the eurozone economy would perform "much better" in the second quarter than the first and suggested that the ECB could lean toward cutting back a bond-buying program it began in May to help tackle the region's sovereign debt crisis. The IMF this week said the ECB may have to step up its bond purchases to convince investors it will not allow market tensions to escalate.

Bank of Korea raises rates
The Bank of Korea increased its base interest rate for the first time since August 2008 as its economy rebounded to pre-crisis levels with the unemployment rate at 19-month lows.

U.S. economic news for the week ended July 2, 2010

U.S. economic news

U.S. unemployment rate drops, jobless numbers grow The official U.S. unemployment rate fell to 9.5% in June from 9.7% in May, in a report released Friday morning by the Labor Department. The U.S. economy shed 125,000 jobs in June, mainly driven by the elimination of temporary census jobs. Private sector jobs grew by 83,000. While the news was not rosy, it was better than had been expected and caused a minor rebound in the major U.S. stock indices Friday morning.

Weekly jobless claims climb  
Weekly initial jobless claims rose 13,000 to 472,000 in the week ended June 26. The four-week moving average, which smooths the data’s volatility, rose 3,250 to 466,500.

U.S. consumer confidence declines  

Consumer confidence fell substantially in June as concerns grew about the U.S. economic recovery. The Conference Board’s index of consumer confidence for June declined to 52.9 from 62.7 in May, far below the 62.5 reading economists had expected in a survey conducted by Dow Jones Newswire.

U.S. manufacturing activity grows more slowly
U.S. factory activity slowed in June. The Institute for Supply Management index dropped to 56.2 from 59.7. This measure indicates that manufacturing activity was growing but at a slower pace. The ISM business barometer slipped to 59.1 in June from 59.7 in May.

Pending home sales plummet  
U.S. pending home sales fell 30% in May with the termination of the federal tax credit program that had given a key boost to the housing market. The National Association of Realtors index for pending sales of existing homes dropped to 77.6 from 110.9 in April. Pending home sales in May were down almost 16% from a year earlier.

Automakers’ sales stall  
New vehicle sales in the United States decelerated in June, providing another signal that the economy could be stalling. According to Autodata , U.S. auto sales fell about 4.7% from May to June. Sales fell 14% for Toyota , 13% for General Motors, 12% for Chrysler, and 11% for Ford, levels that exceeded the typical annual May-to-June 3% sales decline. However, all automakers reported increases from a year earlier.
 

U.S. and global corporate news

General Mills’ profit declines  
Packaged food company General Mills reported a 41% decline in its fourth-quarter earnings, and its sales fell 2% from the year-earlier period, which included an extra week. However, excluding the extra week, earnings fell only 5%, and sales rose 4%.

Monsanto earnings fall

Agricultural biotechnology company Monsanto posted a 45% drop in its third-quarter profit, hurt by weed-killer competition and a backlash by farmers against high-priced genetically modified seeds. Sales fell 6.3% for the quarter.

Global economic news

Factory growth continues but gains slow globally  
Manufacturing activity expanded globally in June, but the pace of growth slowed in most countries. Only Greece , Hungary , and South Africa had a contraction in manufacturing, while Germany , Brazil , Italy , Russia , and Poland saw a pickup in the pace of growth in their purchasing manager indices, according to The Wall Street Journal. Countries that recorded slower growth included the United States , China , the United Kingdom , Japan , France , and Spain .

Japan’s economy slows slightly
Industrial output in Japan fell a seasonally adjusted 0.1% in May, due largely to a 1.7% slowdown in exports, which were hurt by the fading impact of economic stimulus measures, recalls from Toyota and other Japanese automakers, and strikes at Chinese factories. Japanese industrial output had risen the three previous months.

Eurozone economic recovery falters  
The Conference Board’s Leading Economic Index for the eurozone fell 0.5% to 109.7 in May, its first decline in 14 months. However, the LEI for the eurozone is still almost 15% higher than its trough in March 2009.

Consumer confidence climbs in eurozone
Consumer confidence rose slightly in June in the Eurozone, according to the European Commission’s overall Economic Sentiment Indicator, which rose to 98.7 from 98.4. Economists had forecast a decline to 98. However, consumer confidence in the United Kingdom fell in June to its lowest level since last August.

German unemployment ebbs for the 12th straight month  
Despite problems facing other European countries, Germany continues to make progress on its economic recovery, as German unemployment fell for a twelfth consecutive month in June. The unemployment rate in Europe ’s largest economy declined to 7.5% from 7.7% in May. The number of jobless fell by 88,000 to 3,153 million, according to the Federal Labor Agency. However, when adjusted for seasonal swings, the jobless rate was 7.7%, unchanged from May, and the number of jobless declined by only 21,000.

U.S. economic news for the week ended June 1, 2010

U.S. stocks, which earlier in the week recorded one of their biggest gains of the year, were in retreat by Friday, losing ground after weaker-than-expected U.S. jobs numbers and amid fresh concerns about eurozone sovereign debt. The euro dropped to its lowest level in four years after investors resumed their flight from riskier assets following a Hungarian senior official's warning that the country is in the midst of a Greece-like sovereign credit crisis.

U.S. economic news

Payrolls rise less than expected; unemployment falls to 9.7%
Payrolls rose by 431,000 in May after a 290,000 increase in April. The gain was smaller than expected and reflected a 411,000 jump in government hiring of temporary help for the 2010 census. At the same time, the unemployment rate fell to 9.7% as Americans suspended their job searches.

Manufacturing continues rebound
U.S. manufacturing grew at a solid pace in May as export orders continued to expand rapidly. The Institute for Supply Management reported that an index of export orders within its manufacturing report rose to 62 in May, its highest level since 1988. Nonmanufacturing activity also grew in May at the same pace as it did in April. That growth is an indication that the recovery that began in the manufacturing sector has broadened.

Auto sales rise
U.S. auto sales rose for the seventh month in a row in May on the strength of big gains in most car markets.

U.S. and global corporate news

Fitch and Moody's downgrade BP
On Thursday, both Fitch Ratings and Moody's Investor Services downgraded BP's long-term credit rating one notch. The agencies warned that further downgrades are possible as the company's liability for the oil spill in the Gulf of Mexico escalated into billions of dollars and it faced a criminal investigation in the United States.

May same-store sales encouraging
May same-store sales reports were encouraging despite the still uneven nature of the U.S. economic recovery. Costco Wholesale reported that same-store sales rose 9% as net sales climbed 11%. Target's same-store sales rose 1.3% and those at Saks' rose 5.8%. Sales at teen retailers American Eagle Outfitters, Buckle, and Hot Topic all fell more than expected.

Whirlpool recalls dishwashers
Whirlpool announced a recall of 1.7 million dishwashers from its Maytag unit because of a potential fire hazard. Besides Maytag, the brands under the recall include Jenn-Air, Amana, and Crosley.

Anadarko affirms outlook; Lukoil profits double
Even though the company has suspended its deepwater drilling in the Gulf of Mexico in compliance with the U.S. government's six-month ban on drilling in the Gulf, Anadarko Petroleum affirmed its 2010 production, sales volume, and capital spending plans for the year. Russia's largest privately owned producer, OAO Lukoil Holdings, reported that its first-quarter profit more than doubled from a year ago after rising crude prices offset falling production from its western Siberian fields.

Global economic news

Credit default swaps on sovereign bonds surge
Credit default swaps on sovereign bonds surged on speculation that Europe's debt crisis is worsening after Hungary said it is in a grave economic situation after the previous government manipulated figures and lied about the state of the economy.

Bank of Canada hikes rates
Given the strength of its economy, Canada this week became the first G-7 country to raise interest rates. The Bank of Canada raised its key overnight rate by 0.25% to 0.50% but refrained from indicating that this hike was the first in a series.

Kan becomes Japanese prime minister
Naoto Kan took over as Japan 's prime minister this week after lawmakers from the ruling Democratic Party of Japan elected him premier. Kan , who was finance minister in the last cabinet, said he is working on a new strategy to rein in the world's largest public debt (as a percentage of gross domestic product) and safeguard economic growth ahead of midterm elections next month.

German government agrees to block short-selling
The German government agreed to block the speculative "naked" short-selling of German stocks and eurozone sovereign bonds.Germany shocked European Union partners and markets last month when it first introduced unilateral measures. 

Europe's services and manufacturing slows less than expected
Growth in Europe 's service and manufacturing industries slowed at a pace that was less than initially estimated for May. The growth was welcome news as the outlook for the region's economy has dimmed in recent months with the threat of contagion from the Greek debt crisis raising concerns about the region's future.

Australian exports surge most in three decades
Australian exports, excluding farm goods, surged by the most in almost three decades in April as shipments of iron ore and coal to China pushed the trade balances to a surplus for the first time in 12 months.

Pakistan central bank head quits amid economic strain
Pakistan 's central bank governor Syed Salim Raza resigned Thursday. His departure raises concerns about the nation's economic management at a time when the government is grappling with a shortage of financial resources amid rising war costs.