Stocks fell sharply this week as fears increased that the eurozone crisis was spreading from the periphery to top-rated nations such as Austria, the Netherlands, Finland, and France. Yields on French, Italian, and Spanish bonds soared, with those in Spain reaching euro-era records. The sharp rise in European borrowing costs has increased worries that the debt crisis could spread to larger, heavily indebted countries.
As the crisis heated up, so too did the disagreement between France and Germany over the role that the European Central Bank (ECB) should play in solving it. Investors have shrugged off the bank's limited bond buying, and there has been increasing pressure on the ECB to take drastic action to stabilize European bond markets. Germany rejected France's call to deploy the ECB to rescue indebted nations, and ECB President Mario Draghi pushed back against the calls from politicians and investors and expressed impatience with leaders' failure to act to bolster the region's rescue fund. He noted that the ECB would lose credibility if it departed from its primary role of keeping prices stable.
U.S. and global economic news
Monti takes reins from Berlusconi
On Wednesday, Mario Monti, a 68-year-old economics professor, took over as prime minister of Italy. He now faces a final confidence vote in his new government after vowing to attack the euro area's second-largest debt burden and spur growth in the region's third-largest economy.
Papademos wins approval for finalizing next year's budget
Greek Prime Minister Lucas Papademos won approval for finalizing next year's budget, which is designed to regain the confidence of creditors and secure resumption of international financing. The budget forecast that Greece's debt as a proportion of gross domestic product will fall to 145.5% in 2012 from 161.7% this year.
U.S. data prompt upward growth revisions
Solid U.S. economic data have economists upping their forecasts for fourth-quarter growth. JPMorgan Chase raised its growth forecast to 3% in the fourth quarter from its previous prediction of 2.5%. Solid data on consumption, business spending, and residential investment all point to higher GDP growth in the fourth quarter. This week, retail sales seemed to underline that positive movement. Sales rose 0.5% in October, the fifth consecutive monthly increase. Adding to the positive sentiment, initial jobless claims fell to 388,000 in the week ended November 12 from 393,000 the previous week. Industrial production rose 0.7% in October, more than expected, and confidence among U.S. builders climbed in November.
Eurozone economy grows modestly
The eurozone economy grew modestly in the third quarter, expanding by 0.2%, the same pace as that of the second quarter, according to Eurostat. Economists have warned, however, that the escalating eurozone crisis and fiscal austerity measures across the region have yet to feed into growth. Meanwhile, Bank of England Governor Mervyn King said Britain faces a “markedly weaker” outlook for the economy as Europe’s crisis threatens global growth.
U.S. and global corporate news
Fitch warns U.S. banks of eurozone risk
Fitch Ratings told U.S. banks that further contagion from Europe's debt crisis could pose a risk to them. Stocks extended losses after Fitch said that while U.S. lenders have “manageable direct exposures” to Greece, Ireland, Italy, Portugal, and Spain, further turmoil in those markets poses a “serious risk.”
Banks slash spending, jobs
UBS said it will slash its investment banking unit assets by one-half and shed flagging businesses as it focuses on its private banks. Citigroup is planning to eliminate 900 jobs in its securities and banking division; that is about 5% of the unit's worldwide staff. Citigroup is drawing up plans to eliminate about 3,000 jobs, or 1% of its global work force. This week BNP Paribas also announced plans to cut about 1,400 jobs, less than 1% of its work force.
Dell reports profits; Sears notes a wider-than-expected loss
Dell reported that its third-quarter profits jumped nearly 9% but that its revenue was flat. The computer maker issued a cautious outlook because of the weak economy and component shortages caused by flooding in Thailand. Sears Holdings reported a wider-than-expected third-quarter loss; its revenue fell short of expectations and margins narrowed.
Angie's List goes public
Consumer review website Angie's List went public with its stock pricing at $13 per share. It sold 8.79 million shares at the high.
Friday, November 18, 2011
Friday, November 11, 2011
U.S. economic news for the week ended November 11, 2011
Following another week of intense uncertainty, markets breathed a sigh of relief after Italy and Greece showed progress in the formation of new governments. Stocks recouped losses, and bond yields eased from the record levels hit earlier in the week.
U.S. and global economic news
Italy and Greece take steps to change governments
Italy's senate approved a key budget bill, paving the way for Prime Minister Silvio Berlusconi to step down and for a new government, led by former European Union Competition Commissioner Mario Monti, to be formed. Greece, meanwhile, will swear in Lucas Papademos to lead a unity government. That decision ends days of wrangling among political parties over who will lead an interim government after a political crisis forced Prime Minister George Papandreou to step down.
Italy's bond yields retreat after hitting euro-era highs
Italy's 10-year bond yields, which soared to a euro-era high of 7.45% this week, fell after the budget bill's approval. The level above 7% is one that had previously driven Greece, Ireland, and Portugal to seek international bailouts. The bond panic was set off earlier in the week after LCH.Clearnet Group demanded increased deposits for trading Italy's securities. LCH is a clearinghouse that guarantees investors' trades are completed.
EU cuts 2012 growth forecast
The European Union cut its growth forecast for 2012 to 0.6%, sharply down from the 1.9% it made six months ago. The European Commission, which is the EU's executive arm, said it could not rule out the possibility of a deep and prolonged recession.
China's inflation slows
China's inflation slowed significantly in October, potentially opening the door for Beijing to loosen its reins on the economy. Housing prices showed further signs of decline. However, the slowing pace of inflation is also raising concerns about the nation's role as an engine of global growth.
BoE maintains bond purchase targets; keeps rates unchanged
The Bank of England maintained its target for asset purchases. The ceiling for so-called quantitative easing was held at £275 billion. The bank also kept its key interest rate at a record low of 0.5%
U.S. consumer confidence climbs more than expected
Confidence among U.S. consumers rose more than expected in early November, according to the Thomson Reuters/University of Michigan preliminary index of consumer confidence. That index climbed to its highest level since June. In other U.S. news, in September consumers stepped up their borrowing and the trade deficit unexpectedly narrowed on record exports. First-time applications for unemployment benefits fell 10,000 to a seven-month low, and wholesale inventories unexpectedly fell in September for the first time since 2009 as a gain in sales helped keep stockpiles in line with demand.
Bank Indonesia cuts rates
Bank Indonesia surprised markets by cutting its key reference rate by a half a percentage point to 6%, a record low. This is the largest cut for the bank since March 2009. South Korea and Malaysia both left rates unchanged this week.
U.S. and global corporate news
Crédit Agricole's profits fall 65%
Crédit Agricole, France's third-largest bank by market value, reported a 65% drop in third-quarter profits after it was hit by a heavier-than-expected write-down on its Greek government bonds and further losses at its troubled Emporiki Bank of Greece unit. Like BNP Paribas and Société Général, Crédit Agricole has reduced its exposure to government bonds in troubled eurozone countries in recent months.
Toyota's earnings slump 19%
Toyota Motor reported a 19% decline in quarterly profit as the strong yen and production cutbacks hit sales.
Yelp planning IPO
Yelp is set to launch plans for an IPO that could value the online consumer review company at between $1 billion and $2 billion.
Walt Disney's net jumps 30%
Walt Disney reported that its fourth-quarter profits jumped 30%. The profits, which beat estimates, got a boost from strength in Disney's parks and resorts and media network business segments.
U.S. and global economic news
Italy and Greece take steps to change governments
Italy's senate approved a key budget bill, paving the way for Prime Minister Silvio Berlusconi to step down and for a new government, led by former European Union Competition Commissioner Mario Monti, to be formed. Greece, meanwhile, will swear in Lucas Papademos to lead a unity government. That decision ends days of wrangling among political parties over who will lead an interim government after a political crisis forced Prime Minister George Papandreou to step down.
Italy's bond yields retreat after hitting euro-era highs
Italy's 10-year bond yields, which soared to a euro-era high of 7.45% this week, fell after the budget bill's approval. The level above 7% is one that had previously driven Greece, Ireland, and Portugal to seek international bailouts. The bond panic was set off earlier in the week after LCH.Clearnet Group demanded increased deposits for trading Italy's securities. LCH is a clearinghouse that guarantees investors' trades are completed.
EU cuts 2012 growth forecast
The European Union cut its growth forecast for 2012 to 0.6%, sharply down from the 1.9% it made six months ago. The European Commission, which is the EU's executive arm, said it could not rule out the possibility of a deep and prolonged recession.
China's inflation slows
China's inflation slowed significantly in October, potentially opening the door for Beijing to loosen its reins on the economy. Housing prices showed further signs of decline. However, the slowing pace of inflation is also raising concerns about the nation's role as an engine of global growth.
BoE maintains bond purchase targets; keeps rates unchanged
The Bank of England maintained its target for asset purchases. The ceiling for so-called quantitative easing was held at £275 billion. The bank also kept its key interest rate at a record low of 0.5%
U.S. consumer confidence climbs more than expected
Confidence among U.S. consumers rose more than expected in early November, according to the Thomson Reuters/University of Michigan preliminary index of consumer confidence. That index climbed to its highest level since June. In other U.S. news, in September consumers stepped up their borrowing and the trade deficit unexpectedly narrowed on record exports. First-time applications for unemployment benefits fell 10,000 to a seven-month low, and wholesale inventories unexpectedly fell in September for the first time since 2009 as a gain in sales helped keep stockpiles in line with demand.
Bank Indonesia cuts rates
Bank Indonesia surprised markets by cutting its key reference rate by a half a percentage point to 6%, a record low. This is the largest cut for the bank since March 2009. South Korea and Malaysia both left rates unchanged this week.
U.S. and global corporate news
Crédit Agricole's profits fall 65%
Crédit Agricole, France's third-largest bank by market value, reported a 65% drop in third-quarter profits after it was hit by a heavier-than-expected write-down on its Greek government bonds and further losses at its troubled Emporiki Bank of Greece unit. Like BNP Paribas and Société Général, Crédit Agricole has reduced its exposure to government bonds in troubled eurozone countries in recent months.
Toyota's earnings slump 19%
Toyota Motor reported a 19% decline in quarterly profit as the strong yen and production cutbacks hit sales.
Yelp planning IPO
Yelp is set to launch plans for an IPO that could value the online consumer review company at between $1 billion and $2 billion.
Walt Disney's net jumps 30%
Walt Disney reported that its fourth-quarter profits jumped 30%. The profits, which beat estimates, got a boost from strength in Disney's parks and resorts and media network business segments.
Tuesday, October 25, 2011
U.S Economic News for week ending October 21, 2011
Stocks wavered throughout the week as investors watched for news that European leaders were producing a viable plan to stabilize European economies and banks. Better-than-expected corporate earnings reports from many companies buoyed markets.
U.S. and global economic news
European leaders struggle to seal debt deal
Throughout the week European policymakers captured the attention of investors as they worked to come up with a deal to contain the European debt and banking crisis. Finance ministers met in Brussels on Friday to lay the groundwork for an October 23 gathering of government leaders that was to have been the deadline for a solution to the debt crisis. However, another summit was scheduled for October 26 after Germany and France, on Thursday, said that the European Union needed more time to seal a "global and ambitious" accord.
Moody's cuts Spain's debt rating, warns France
Moody's Investors Service downgraded Spain's government bond rating two notches in response to the country's fading growth prospects. The credit rating agency also warned France about its credit rating, noting that France in the months ahead will face challenges such as the possible need to support other European sovereigns or its own. Those challenges are exerting pressure on the stable outlook of France's AAA-debt rating.
China's economic growth slows
China's economy in the third quarter grew 9.1% from a year earlier, the slowest pace since 2009. The news drove global stocks lower amid investor fear that Europe's debt crisis would hinder the global recovery. The economy grew 9.5% in the second quarter of this year.
U.S. existing home sales fall 3%
The National Association of Realtors reported that existing home sales fell 3% in September to a 4.91 million annual rate. The median home price dropped 3.5% from a year ago and about one in five real estate agents polled said contracts had been cancelled. U.S. home construction rose in September, with work beginning on 658,000 homes.
U.S. and global corporate news
Big U.S. banks report mixed results as earnings season heats up
Morgan Stanley saw a $2.15 billion profit for the third quarter. Goldman Sachs reported a rare quarterly loss, and Bank of America lost its title as the biggest U.S. bank by assets to JPMorgan Chase. Microsoft saw 6.1% gains in its net income helped by sales of its Office product. Intel's profit rose 17%, and the company reported its sixth straight quarter of record sales. General Electric's earnings climbed 11% in the third quarter as the finance unit's gains were able to override tighter profit margins in the energy business. Schlumberger, the world's largest oil field services provider, reported third-quarter profits that missed expectation as income from Asia and the Middle East declined. Philip Morris International, the largest publicly traded tobacco company, reported a 30% increase in profit. Higher shipment levels and increased cigarette prices in Asia helped the company beat profit estimates.
iPhone helps Verizon double profits; AT&T suffers as it loses sole carrier status
Verizon's profit doubled in the third quarter as consumers bought its iPhone and Android devices. AT&T’s profit fell 70.6% in the third quarter from a year ago as net income dropped to $3.62 billion from $12.3 billion in the same quarter last year. Last year’s income was boosted by the sale of a subsidiary and a tax settlement. The company, which this year lost the exclusive contract with Apple to carry the iPhone, said it added less than one-half the number of contract customers than it did a year earlier. Also hurting it bottom line, iPhone activations slowed to 2.7 million, nearly one million fewer than in the second quarter. Meanwhile, Apple's profit climbed 54% but missed expectations because it sold fewer-than-expected iPhones.
Groupon tempers IPO
Groupon, the largest online coupon site, is seeking an $11.4 billion valuation from its initial public offering. That is less than one-half the amount discussed with banks earlier this year. The company will offer 30 million shares of Class A common stock at $16 to $18 each.
U.S. and global economic news
European leaders struggle to seal debt deal
Throughout the week European policymakers captured the attention of investors as they worked to come up with a deal to contain the European debt and banking crisis. Finance ministers met in Brussels on Friday to lay the groundwork for an October 23 gathering of government leaders that was to have been the deadline for a solution to the debt crisis. However, another summit was scheduled for October 26 after Germany and France, on Thursday, said that the European Union needed more time to seal a "global and ambitious" accord.
Moody's cuts Spain's debt rating, warns France
Moody's Investors Service downgraded Spain's government bond rating two notches in response to the country's fading growth prospects. The credit rating agency also warned France about its credit rating, noting that France in the months ahead will face challenges such as the possible need to support other European sovereigns or its own. Those challenges are exerting pressure on the stable outlook of France's AAA-debt rating.
China's economic growth slows
China's economy in the third quarter grew 9.1% from a year earlier, the slowest pace since 2009. The news drove global stocks lower amid investor fear that Europe's debt crisis would hinder the global recovery. The economy grew 9.5% in the second quarter of this year.
U.S. existing home sales fall 3%
The National Association of Realtors reported that existing home sales fell 3% in September to a 4.91 million annual rate. The median home price dropped 3.5% from a year ago and about one in five real estate agents polled said contracts had been cancelled. U.S. home construction rose in September, with work beginning on 658,000 homes.
U.S. and global corporate news
Big U.S. banks report mixed results as earnings season heats up
Morgan Stanley saw a $2.15 billion profit for the third quarter. Goldman Sachs reported a rare quarterly loss, and Bank of America lost its title as the biggest U.S. bank by assets to JPMorgan Chase. Microsoft saw 6.1% gains in its net income helped by sales of its Office product. Intel's profit rose 17%, and the company reported its sixth straight quarter of record sales. General Electric's earnings climbed 11% in the third quarter as the finance unit's gains were able to override tighter profit margins in the energy business. Schlumberger, the world's largest oil field services provider, reported third-quarter profits that missed expectation as income from Asia and the Middle East declined. Philip Morris International, the largest publicly traded tobacco company, reported a 30% increase in profit. Higher shipment levels and increased cigarette prices in Asia helped the company beat profit estimates.
iPhone helps Verizon double profits; AT&T suffers as it loses sole carrier status
Verizon's profit doubled in the third quarter as consumers bought its iPhone and Android devices. AT&T’s profit fell 70.6% in the third quarter from a year ago as net income dropped to $3.62 billion from $12.3 billion in the same quarter last year. Last year’s income was boosted by the sale of a subsidiary and a tax settlement. The company, which this year lost the exclusive contract with Apple to carry the iPhone, said it added less than one-half the number of contract customers than it did a year earlier. Also hurting it bottom line, iPhone activations slowed to 2.7 million, nearly one million fewer than in the second quarter. Meanwhile, Apple's profit climbed 54% but missed expectations because it sold fewer-than-expected iPhones.
Groupon tempers IPO
Groupon, the largest online coupon site, is seeking an $11.4 billion valuation from its initial public offering. That is less than one-half the amount discussed with banks earlier this year. The company will offer 30 million shares of Class A common stock at $16 to $18 each.
Subscribe to:
Posts (Atom)