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.
Friday, April 8, 2011
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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