Stocks were volatile this week as President Barack Obama's $447 billion plan to generate jobs failed to bolster investor confidence in the U.S. economy, and U.S. Federal Reserve Board Chairman Ben S. Bernanke disappointed markets by not detailing new plans to boost growth. Weakness in overseas markets added to the jitters as concerns over the likelihood of a Greek default mounted ahead of a meeting of finance ministers and central bankers from the Group of Seven leading economies in Marseilles, France. The euro fell to a nine-month low against the U.S. dollar, and Greek credit default swaps soared to record levels. Further unnerving markets this week were reports that the United States had received specific and "credible" information that al Qaeda is planning car and truck bombings in New York and Washington to coincide with the 10-year anniversary of the September 11 terrorist attacks.
U.S. and global economic news
Obama calls for extension of unemployment benefits
In the announcement of his $447 billion plan to spur growth, President Obama called on U.S. lawmakers to pass $62 billion in spending to extend unemployment insurance benefits through 2012 and fund programs to alleviate long-term joblessness.
Swiss central bank caps franc
The Swiss National Bank effectively put a cap on its currency, the Swiss franc. The bank said it would buy euros in "unlimited quantities" whenever the eurozone currency falls below 1.20 francs.
ECB and BOE keep rates unchanged
The European Central Bank and the Bank of England kept interest rates unchanged this week. ECB President Jean Claude Trichet warned that the eurozone's economy will grow more slowly than previously expected, between 1.4% and 1.8% in 2011, and between 0.4% and 2.2% in 2012. Trichet also said that risks to medium-term inflation have moderated, but he stopped short of signaling a change in the bank's interest rate path.
Greek credit default swaps hit record
Credit default swaps insuring Greek sovereign bonds jumped 212 basis points to a record 3,238 this week. The surge, which signals that investors believe there is more than a 90% chance that Greece will default, came after reports that the Greek economy shrank more than previously reported. The country's gross domestic product contracted 7.3% in the second quarter.
U.S. trade deficit posts biggest drop in over two years
In July the U.S. trade deficit posted its biggest drop in nearly two-and-one-half years as exports surged to a record high and oil prices fell from the near-three-year highs reached in May.
U.S. jobless claims rise
U.S. jobless claims rose more than expected last week, by 2,000 to 414,000, as the labor market continues its struggle to recover.
U.S. and global corporate news
Groupon cancels roadshow
Groupon canceled its investor roadshow and is reevaluating plans for an initial public offering amid the current market volatility.
Twitter boasts 100 million users
Twitter, the largest U.S. microblogging service, announced that it now has more than 100 million active users worldwide. Usage has increased more than 80% since the beginning of the year.
Google to buy Zagat
Google agreed to buy restaurant review company Zagat Survey as the Internet giant moved to take a share of revenue from local businesses. Earlier this year, Google entered into a two-year agreement with Local.com to implement certain advertising and search services.
Saab Automobile vowed to appeal the refusal of a Swedish court to grant the carmaker protection from creditors. The ruling essentially opens the way for labor unions representing unpaid workers to petition for bankruptcy and reclaim wages.
Tuesday, September 13, 2011
Monday, September 12, 2011
U.S. economic news for the week ended September 2, 2011
U.S. job growth fizzled in August, according to both the U.S. Department of Labor’s monthly nonfarm jobs report and the private sector jobs report. In a very disappointing setback, the Labor Department showed no change in payrolls in August, far below expectations. U.S. and European stocks fell sharply in response to the report. Overall, however, major global stock indices showed gains for the week, which marked the end of the worst month in a decade for the U.S. stock market. Chinese stocks had their worst week in three months, as economic and earnings growth slumped while inflation remained at its highest level in three years. In Europe, the Stoxx Europe 600 Index had its strongest weekly rally since July. The U.S. 10-year Treasury yield fell to 2.05% as recessionary fears rose. Oil prices fell below $86 a barrel.
Globally, manufacturing activity appears to be sluggish, with Chinese and U.K. manufacturing activity dropping to multi-year lows. However, Germany’s economy continued to shine in contrast to many neighboring European countries, with bullish news on manufacturing and jobs.
The week began with some relief that the worst fears regarding Hurricane Irene had failed to materialize. The storm blew through Manhattan with little disruption to stock market operations. However, millions of households were affected throughout the eastern United States, a development that could at least temporarily weigh down economic activity.
U.S. and global economic news
U.S. job growth fizzles
U.S. employment stagnated in August, with no job growth, according to the monthly nonfarm payroll report released by the Labor Department Friday morning. It was the first time in 11 months there was no net increase in U.S. jobs. The disappointing news, however, was influenced by the 45,000 Verizon workers who were out of work because they were on strike at the time the report was compiled. Still, the report's employment picture fell far short of the 60,000- to 65,000-job gain that had been anticipated by economists, and the U.S. unemployment rate remained at 9.1%.
More significantly, the weak showing reflected a lack of confidence among U.S. employers following the debt-ceiling showdown in Washington, the S&P downgrade of U.S. debt, the plummeting stock market, and ongoing concerns about Europe’s sovereign debt crisis. While the report conveyed a flat employment picture, it did indicate an increase of 17,000 jobs in the private sector.
ADP reports 91,000 more private sector jobs
Private businesses added 91,000 jobs in August, on a seasonally adjusted basis, according to a report released by payroll giant Automatic Data Processing (ADP) and Macroeconomic Advisers, a consultancy. Almost all the hiring occurred at small businesses (a gain of 58,000) and medium-size businesses (30,000 new jobs). Businesses with 500 or more employees added only 3,000 jobs.
U.S. manufacturing growth stays surprisingly strong
U.S. manufacturing activity grew slightly in August, according to the Institute for Supply Management’s factory index, which fell slightly to 50.6 from 50.9 in July. Economists had expected a drop to 48.5.
Weekly jobless claims ease slightly in United States
Initial claims for unemployment benefits by U.S. workers fell by 12,000 to a seasonally adjusted 409,000 in the week ended August 27, according to the Labor Department. However, the four-week moving average of new claims rose by 1,750 to 410,250.
Consumer confidence indices slip
U.S. consumers lost confidence in August, according to several confidence gauges. The Conference Board’s index of consumer confidence dropped to 44.5 from 59.2 in July, its lowest reading since April 2009. The survey also showed that consumers expect inflation to rise to 5.8% in the next 12 months. Bloomberg’s Consumer Confidence Index fell to -49.1 from -47.0 in July, its second lowest level in two years. The Thomson Reuters/University of Michigan final index of consumer confidence in August slipped to its lowest level since November 2008.
Consumer spending rose in July
U.S. consumers spent more than expected in July, on the basis of a report from the U.S. Department of Commerce, which showed that consumer spending rose 0.8%, the largest gain in five months. Income rose 0.3%, and the savings rate slowed to 5.0% from 5.5% in June, a trend that suggests a rise in confidence about the economy.
Eurozone confidence fades
Economic confidence among Eurozone businesses and consumers fell in August. The Economic Sentiment Indicator declined for the sixth-straight month, to 98.3 in August from 103.0 in July, the European Commission reported. It was the weakest reading since March 2010 and far below the 100.5 expected by economists. The consumer confidence index slid to -16.5 from -11.2, its largest one-month decline since 1990. In a separate report, Eurostat, the European Union statistics office, reported that inflation remained at 2.5% in August and unemployment stood unchanged at 10.0% in July.
Global manufacturing activity slumps
Manufacturing activity slumped across much of the world in August, according to various reports. Manufacturing in the Eurozone contracted, U.K. factory activity hit a two-year low, and a Chinese manufacturing index straddled the line between expansion and contraction, at 50.9, just above its 29-month low recorded in July. South Korea’s purchasing managers' index fell into negative territory, to 49.7 from 51.3 in July.
German economic resilience a positive sign for Europe
Bullish reports from Germany indicate that Europe’s largest and strongest economy continues to grow. Unemployment remained at its lowest level in two decades in August as unemployment fell for the twenty-sixth consecutive month. The unemployment rate remained at 7%, its lowest level since German reunification in 1991. Machine orders grew 9% in July from a year earlier.
Canadian economy shrinks
Canada’s economic output shrank unexpectedly in the second quarter, its first contraction in two years. Canada depends heavily on international trade and has been hurt by the U.S. and European economic slowdown. Canadian GDP declined 0.1% in the second quarter, for an annualized 0.4% contraction. Among the G-7 nations, only Japan and Canada had a contraction in economic activity in the second quarter.
U.S. and global corporate news
U.S. auto sales rise
Sales rose in August for U.S. car manufacturers. Chrysler Group reported a 31% jump in sales, while General Motors and Nissan Motor each reported close to a 20% increase and Ford Motor had an 11% gain. Because of a slow recovery in production after the March tsunami, Japan’s Honda Motor and Toyota Motor reported decreases in U.S. sales of 24.3% and 12.7%, respectively.
U.S. Justice Department a hard sell on merger
The U.S. Department of Justice filed an antitrust lawsuit to block a proposed $39-billion merger between AT&T and T-Mobile USA, saying that it would substantially decrease competition, lead to higher prices, and reduce product innovation.
Bombardier profit soars Canada’s transportation giant Bombardier posted a 53% jump in second-quarter profit as revenue grew in both its aerospace and transportation divisions.
Globally, manufacturing activity appears to be sluggish, with Chinese and U.K. manufacturing activity dropping to multi-year lows. However, Germany’s economy continued to shine in contrast to many neighboring European countries, with bullish news on manufacturing and jobs.
The week began with some relief that the worst fears regarding Hurricane Irene had failed to materialize. The storm blew through Manhattan with little disruption to stock market operations. However, millions of households were affected throughout the eastern United States, a development that could at least temporarily weigh down economic activity.
U.S. and global economic news
U.S. job growth fizzles
U.S. employment stagnated in August, with no job growth, according to the monthly nonfarm payroll report released by the Labor Department Friday morning. It was the first time in 11 months there was no net increase in U.S. jobs. The disappointing news, however, was influenced by the 45,000 Verizon workers who were out of work because they were on strike at the time the report was compiled. Still, the report's employment picture fell far short of the 60,000- to 65,000-job gain that had been anticipated by economists, and the U.S. unemployment rate remained at 9.1%.
More significantly, the weak showing reflected a lack of confidence among U.S. employers following the debt-ceiling showdown in Washington, the S&P downgrade of U.S. debt, the plummeting stock market, and ongoing concerns about Europe’s sovereign debt crisis. While the report conveyed a flat employment picture, it did indicate an increase of 17,000 jobs in the private sector.
ADP reports 91,000 more private sector jobs
Private businesses added 91,000 jobs in August, on a seasonally adjusted basis, according to a report released by payroll giant Automatic Data Processing (ADP) and Macroeconomic Advisers, a consultancy. Almost all the hiring occurred at small businesses (a gain of 58,000) and medium-size businesses (30,000 new jobs). Businesses with 500 or more employees added only 3,000 jobs.
U.S. manufacturing growth stays surprisingly strong
U.S. manufacturing activity grew slightly in August, according to the Institute for Supply Management’s factory index, which fell slightly to 50.6 from 50.9 in July. Economists had expected a drop to 48.5.
Weekly jobless claims ease slightly in United States
Initial claims for unemployment benefits by U.S. workers fell by 12,000 to a seasonally adjusted 409,000 in the week ended August 27, according to the Labor Department. However, the four-week moving average of new claims rose by 1,750 to 410,250.
Consumer confidence indices slip
U.S. consumers lost confidence in August, according to several confidence gauges. The Conference Board’s index of consumer confidence dropped to 44.5 from 59.2 in July, its lowest reading since April 2009. The survey also showed that consumers expect inflation to rise to 5.8% in the next 12 months. Bloomberg’s Consumer Confidence Index fell to -49.1 from -47.0 in July, its second lowest level in two years. The Thomson Reuters/University of Michigan final index of consumer confidence in August slipped to its lowest level since November 2008.
Consumer spending rose in July
U.S. consumers spent more than expected in July, on the basis of a report from the U.S. Department of Commerce, which showed that consumer spending rose 0.8%, the largest gain in five months. Income rose 0.3%, and the savings rate slowed to 5.0% from 5.5% in June, a trend that suggests a rise in confidence about the economy.
Eurozone confidence fades
Economic confidence among Eurozone businesses and consumers fell in August. The Economic Sentiment Indicator declined for the sixth-straight month, to 98.3 in August from 103.0 in July, the European Commission reported. It was the weakest reading since March 2010 and far below the 100.5 expected by economists. The consumer confidence index slid to -16.5 from -11.2, its largest one-month decline since 1990. In a separate report, Eurostat, the European Union statistics office, reported that inflation remained at 2.5% in August and unemployment stood unchanged at 10.0% in July.
Global manufacturing activity slumps
Manufacturing activity slumped across much of the world in August, according to various reports. Manufacturing in the Eurozone contracted, U.K. factory activity hit a two-year low, and a Chinese manufacturing index straddled the line between expansion and contraction, at 50.9, just above its 29-month low recorded in July. South Korea’s purchasing managers' index fell into negative territory, to 49.7 from 51.3 in July.
German economic resilience a positive sign for Europe
Bullish reports from Germany indicate that Europe’s largest and strongest economy continues to grow. Unemployment remained at its lowest level in two decades in August as unemployment fell for the twenty-sixth consecutive month. The unemployment rate remained at 7%, its lowest level since German reunification in 1991. Machine orders grew 9% in July from a year earlier.
Canadian economy shrinks
Canada’s economic output shrank unexpectedly in the second quarter, its first contraction in two years. Canada depends heavily on international trade and has been hurt by the U.S. and European economic slowdown. Canadian GDP declined 0.1% in the second quarter, for an annualized 0.4% contraction. Among the G-7 nations, only Japan and Canada had a contraction in economic activity in the second quarter.
U.S. and global corporate news
U.S. auto sales rise
Sales rose in August for U.S. car manufacturers. Chrysler Group reported a 31% jump in sales, while General Motors and Nissan Motor each reported close to a 20% increase and Ford Motor had an 11% gain. Because of a slow recovery in production after the March tsunami, Japan’s Honda Motor and Toyota Motor reported decreases in U.S. sales of 24.3% and 12.7%, respectively.
U.S. Justice Department a hard sell on merger
The U.S. Department of Justice filed an antitrust lawsuit to block a proposed $39-billion merger between AT&T and T-Mobile USA, saying that it would substantially decrease competition, lead to higher prices, and reduce product innovation.
Bombardier profit soars Canada’s transportation giant Bombardier posted a 53% jump in second-quarter profit as revenue grew in both its aerospace and transportation divisions.
Friday, August 26, 2011
U.S. economic news for the week ended August 26, 2011
U.S. and global economic news
Bernanke makes no promises about aid to economy
In a much-anticipated speech, U.S. Federal Reserve Board Chairman Ben Bernanke said the Fed is ready to provide more support to the economy, but he did not indicate that a move was imminent. Throughout the week, investors had pushed stocks higher on the hopes that Bernanke, in remarks delivered Friday to global monetary policymakers in Jackson Hole, Wyoming, would announce a third round of quantitative easing. At the same meeting last year, Bernanke's promise to stimulate the economy through U.S. Treasury purchases sparked an eight-month rally in the equity market.
U.S. economy grows less than expected
U.S. gross domestic product rose at a 1% annual rate in the second quarter. The gain was less than expected, and the report, released by the U.S. Department of Commerce, showed that consumer spending grew at a 0.4% annual rate, the smallest gain in more than a year. On a more positive note, corporate profits grew, and wages and salaries were revised upward at the start of the year to show the biggest gain in more than four years.
Moody's downgrades Japan
Moody's Investors Service downgraded Japan's debt rating by one notch, citing concerns over the government's ability to reduce its debt and implement long-term sustainability measures. The rating now stands at Aa3, three levels below Aaa. Moody's added that the outlook is stable and that there is little chance the country would experience a crisis in its debt market anytime soon. However, the rating agency said the frequent change in political leadership is a key factor impeding the implementation of the fiscal measures necessary to reduce the debt.
New home sales fall more than expected
Sales of new U.S. homes fell more than expected in July, to the lowest level in five months. The medium sales price of a new home increased 4.7% from July 2010, to $222,000. Last week, mortgage applications for purchases fell 2.4%, to a nearly 15-year low, amid increased fears over the economy.
Weekly U.S. jobless claims rise
U.S. jobless claims unexpectedly rose last week, climbing by 5,000 to 417,000. The numbers were pushed higher by the labor dispute at Verizon Communications. At least 8,500 applications were filed by workers at Verizon last week, compared with the 12,500 filed in the previous week, according to the Commerce Department.
U.S. durable goods orders rise more than expected
U.S. durable goods orders rose 4% in July, more than expected and the most in four months. Rising demand for aircraft and autos made up for a decrease in business equipment, whose orders fell 1.3% in June. Orders excluding the volatile transportation category rose 0.7%.
German economy shows more signs of faltering
A sharper-than-expected drop in Germany's Ifo business confidence survey added to evidence that the German economic recovery is faltering. The index fell to 108.7 from 112.9. Investors' confidence also fell more than expected in August, to its lowest level in more than two-and-a-half years, as fears mounted that Europe's debt crisis will curb growth. Likewise, eurozone growth remained at a two-year low in August. On an annualized basis, eurozone gross domestic product rose 0.7% in the second quarter. The ZEW Center for European Economic Research said its index of investor and analyst expectations, which tries to predict developments six months in advance, fell to -37.6 from -15.0 in July. That is the lowest level since December 2008 and the largest drop since July 2006.
Japan announces moves to curb yen's rise
In an effort to help its export-dependent manufacturing base, the Japanese government announced a package of incentives and regulations aimed at curbing the surge of the yen. The announcement had little effect on the Japanese currency, which has been bought by investors as a safe haven amid worries about U.S. and eurozone finances. The package comprises a $100 billion fund to encourage Japanese businesses to increase acquisitions of companies outside Japan and a rule requiring major financial institutions to report currency trading positions twice daily.
China's manufacturing activity declines
HSBC reported that its China Manufacturing Purchasing Managers Index showed a decline in manufacturing activity for the second month in a row.
U.S. and global corporate news
Buffett to invest $5 billion in Bank of America
Warren Buffett will invest $5 billion in Bank of America in an effort to shore up the company. Bank of America's shares rose 15% after the announcement. Buffett's move follows similar efforts to help prop up Goldman Sachs and General Electric during the 2008 financial crisis. Bank of America's stock has suffered as investors, fearing that the bank is still burdened by billions of dollars in problem mortgages, dumped the stock. The cost of insuring BofA's bonds against default surged to a record this week amid investor concern over the bank's creditworthiness.
Jobs announces resignation
Technology stocks fell after Apple's Steve Jobs announced his resignation as chief executive officer. Jobs, who has been on medical leave since January, will remain with the company as chairman. Tim Cook, formerly chief operating officer, was named CEO.
UBS and ABN Amro announce job cuts
UBS announced plans to lay off more than 5% of its work force, mainly in its investment banking division. The move, which will eliminate 3,500 jobs, is part of a plan to save two billion Swiss francs annually and comes as the bank experiences weaker earnings, tighter regulation, and a rise in the Swiss franc. ABN Amro Bank also announced this week that it will cut an additional 2,350 jobs in the coming years in an effort to cuts costs as it prepares for privatization.
BHP posts record profit
BHP Billiton, the world's largest mining company, posted record full-year profits but cautioned about the future amid rising costs. BHP benefited from strong prices for iron ore and other commodities. The company's net profit rose 86%, to $23.65 billion in the year ended June 30, a record for an Australian company.
Toll Brothers profits jump 54%
Luxury homebuilder Toll Brothers reports its fiscal third-quarter earnings jumped 54% after getting a boost from a larger tax benefit. However, the company said it expects revenues to fall by double digits as home deliveries fall.
Bernanke makes no promises about aid to economy
In a much-anticipated speech, U.S. Federal Reserve Board Chairman Ben Bernanke said the Fed is ready to provide more support to the economy, but he did not indicate that a move was imminent. Throughout the week, investors had pushed stocks higher on the hopes that Bernanke, in remarks delivered Friday to global monetary policymakers in Jackson Hole, Wyoming, would announce a third round of quantitative easing. At the same meeting last year, Bernanke's promise to stimulate the economy through U.S. Treasury purchases sparked an eight-month rally in the equity market.
U.S. economy grows less than expected
U.S. gross domestic product rose at a 1% annual rate in the second quarter. The gain was less than expected, and the report, released by the U.S. Department of Commerce, showed that consumer spending grew at a 0.4% annual rate, the smallest gain in more than a year. On a more positive note, corporate profits grew, and wages and salaries were revised upward at the start of the year to show the biggest gain in more than four years.
Moody's downgrades Japan
Moody's Investors Service downgraded Japan's debt rating by one notch, citing concerns over the government's ability to reduce its debt and implement long-term sustainability measures. The rating now stands at Aa3, three levels below Aaa. Moody's added that the outlook is stable and that there is little chance the country would experience a crisis in its debt market anytime soon. However, the rating agency said the frequent change in political leadership is a key factor impeding the implementation of the fiscal measures necessary to reduce the debt.
New home sales fall more than expected
Sales of new U.S. homes fell more than expected in July, to the lowest level in five months. The medium sales price of a new home increased 4.7% from July 2010, to $222,000. Last week, mortgage applications for purchases fell 2.4%, to a nearly 15-year low, amid increased fears over the economy.
Weekly U.S. jobless claims rise
U.S. jobless claims unexpectedly rose last week, climbing by 5,000 to 417,000. The numbers were pushed higher by the labor dispute at Verizon Communications. At least 8,500 applications were filed by workers at Verizon last week, compared with the 12,500 filed in the previous week, according to the Commerce Department.
U.S. durable goods orders rise more than expected
U.S. durable goods orders rose 4% in July, more than expected and the most in four months. Rising demand for aircraft and autos made up for a decrease in business equipment, whose orders fell 1.3% in June. Orders excluding the volatile transportation category rose 0.7%.
German economy shows more signs of faltering
A sharper-than-expected drop in Germany's Ifo business confidence survey added to evidence that the German economic recovery is faltering. The index fell to 108.7 from 112.9. Investors' confidence also fell more than expected in August, to its lowest level in more than two-and-a-half years, as fears mounted that Europe's debt crisis will curb growth. Likewise, eurozone growth remained at a two-year low in August. On an annualized basis, eurozone gross domestic product rose 0.7% in the second quarter. The ZEW Center for European Economic Research said its index of investor and analyst expectations, which tries to predict developments six months in advance, fell to -37.6 from -15.0 in July. That is the lowest level since December 2008 and the largest drop since July 2006.
Japan announces moves to curb yen's rise
In an effort to help its export-dependent manufacturing base, the Japanese government announced a package of incentives and regulations aimed at curbing the surge of the yen. The announcement had little effect on the Japanese currency, which has been bought by investors as a safe haven amid worries about U.S. and eurozone finances. The package comprises a $100 billion fund to encourage Japanese businesses to increase acquisitions of companies outside Japan and a rule requiring major financial institutions to report currency trading positions twice daily.
China's manufacturing activity declines
HSBC reported that its China Manufacturing Purchasing Managers Index showed a decline in manufacturing activity for the second month in a row.
U.S. and global corporate news
Buffett to invest $5 billion in Bank of America
Warren Buffett will invest $5 billion in Bank of America in an effort to shore up the company. Bank of America's shares rose 15% after the announcement. Buffett's move follows similar efforts to help prop up Goldman Sachs and General Electric during the 2008 financial crisis. Bank of America's stock has suffered as investors, fearing that the bank is still burdened by billions of dollars in problem mortgages, dumped the stock. The cost of insuring BofA's bonds against default surged to a record this week amid investor concern over the bank's creditworthiness.
Jobs announces resignation
Technology stocks fell after Apple's Steve Jobs announced his resignation as chief executive officer. Jobs, who has been on medical leave since January, will remain with the company as chairman. Tim Cook, formerly chief operating officer, was named CEO.
UBS and ABN Amro announce job cuts
UBS announced plans to lay off more than 5% of its work force, mainly in its investment banking division. The move, which will eliminate 3,500 jobs, is part of a plan to save two billion Swiss francs annually and comes as the bank experiences weaker earnings, tighter regulation, and a rise in the Swiss franc. ABN Amro Bank also announced this week that it will cut an additional 2,350 jobs in the coming years in an effort to cuts costs as it prepares for privatization.
BHP posts record profit
BHP Billiton, the world's largest mining company, posted record full-year profits but cautioned about the future amid rising costs. BHP benefited from strong prices for iron ore and other commodities. The company's net profit rose 86%, to $23.65 billion in the year ended June 30, a record for an Australian company.
Toll Brothers profits jump 54%
Luxury homebuilder Toll Brothers reports its fiscal third-quarter earnings jumped 54% after getting a boost from a larger tax benefit. However, the company said it expects revenues to fall by double digits as home deliveries fall.
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