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.
Friday, June 3, 2011
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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