Archive for October, 2011

Jobless claims data points to jobs improvement

Thursday, October 6th, 2011 | Finance News

WASHINGTON (Reuters) – New claims for unemployment benefits rose less than expected last week, according to a government report on Thursday that hinted at an improvement in labor market conditions.

Initial claims for state unemployment benefits climbed 6,000 to a seasonally adjusted 401,000, the Labor Department said, from a revised 395,000 the prior week.

Economists polled by Reuters had forecast claims rising to 410,000 from the previously reported 391,000.

U.S. stock index futures added to gains after the data, while Treasury debt prices fell and the dollar briefly rose against the euro

"Jobless claims are probably favorable for the labor market," said Pierre Ellis, senior economist at Decision Economics in New York.

The data falls outside the survey period for the government's closely watched employment report for September, which will be released on Friday.

Nonfarm payrolls likely increased 60,000 last month, according to a Reuters survey, after being flat in August. The anticipated gain in nonfarm employment will mostly reflect the return of 45,000 striking Verizon Communications workers to payrolls.

The jobless rate is seen steady at 9.1 percent.

A Labor Department official said there were no special factors influencing the claims report and there was nothing unusual in the state level data.

The department had said difficulties adjusting first-time applications for seasonal fluctuations had resulted in a big drop the previous week.

Despite the rise in claims last week, they remained close to the 400,000 mark, which economists usually associate with some improvement in the labor market.

The weak labor market is the Achilles heel of the recovery, which is under threat from the debt crisis in Europe. Federal Reserve Chairman Ben Bernanke said on Tuesday the economy was "close to faltering" and reiterated the U.S. central bank's commitment to take additional steps to aid growth.

The lofty level of unemployment has put downward pressure on incomes, weighing on consumer spending.

However, early reports from U.S. retailers on Thursday suggested back-to-school sales were brisk last month. Retailers are expected to post an average sales gain of 4.6 percent at stores open at least a year, according to Thomson Reuters.

Last week, the four-week moving average of claims, considered a better measure of labor market trends, fell 4,000 to 414,000.

The number of people still receiving benefits under regular state programs after an initial week of aid dropped 52,000 to 3.70 million in the week ended September 24. That was the lowest level since July.

Economists had expected so-called continuing claims to dip to 3.72 million from 3.73 million the previous week.

The number of Americans on emergency unemployment benefits fell 9,188 to 3.03 million in the week ended September 17, the latest week for which data is available.

A total of 6.86 million people were claiming unemployment benefits during that period under all programs, down 123,009 from the prior week.

(Reporting by Lucia Mutikani, Additional reporting by Ellen Freilich in New York; Editing by Andrea Ricci)


Stocks climb on Europe debt action hopes

Thursday, October 6th, 2011 | Finance News

LONDON – Hopes that Europe is preparing a big plan to shore up its banks gave global stocks another lift Thursday as investors digested keenly awaited policy decisions from the European Central Bank and the Bank of England.

News that the International Monetary Fund is pushing for radical changes in the way the region's debt crisis should be handled and that Germany would be willing to put more money into its banks have helped improve the market tone. At the start of the week, investor sentiment sank amid signs of further procrastination and confusion among European leaders as they tried to get a handle on the continent's debt crisis.

Both central banks were under pressure to loosen their policies amid mounting signs that the European economy is stalling under the pressure of a debt crisis that has hit consumer sentiment hard at a time governments are cutting down on spending.

The European Central Bank failed to satisfy demands in the markets and kept its main interest rate on hold at 1.5 percent, but the Bank of England surprised investors by announcing it will spend another 75 billion pounds ($116 billion). It is an attempt to stimulate a British economy that's suffering from the shockwaves of Europe's debt crisis and steep government spending cuts.

The Bank of England said it was reviving a program of asset purchases which had injected 200 billion pounds between March 2009 and January 2010 to help lift Britain out of a deep recession. The hope is that by buying government bonds from banks, they will in turn use the cash to lend to hard-pressed businesses and households.

Following the decisions, Germany's DAX was up 1.3 percent at 5,545 while the CAC-40 in France rose 2.5 percent to 3,046. The FTSE 100 index of leading British shares was 2.1 percent higher at 5,211.

In the currency markets, the euro was down 0.4 percent at $1.3297 as investors were disappointed by the ECB's failure to act, though investors will be closely monitoring the upcoming press conference of ECB chief Jean-Claude Trichet to see if he announces more liquidity support for Europe's troubled banks.

"A concession today that the risks to future inflation have shifted to the downside would suggest that a reduction could come as soon as next month," said Jennifer McKeown, senior European economist at Capital Economics.

Meanwhile, the pound slid 1.1 percent in the aftermath of the Bank of England's decision to launch more so-called quantitative easing, or QE.

"The BoE is the first central bank to jump back into full blown QE in the this latest phase of stress so no surprise to see the pound get tarred," said Alan Ruskin, an analyst at Deutsche Bank.

Wall Street was also poised to open higher later — Dow futures were up 0.4 percent at 10.879 while the broader Standard & Poor's 500 futures rose 0.2 percent to 1,137.

Investors will also be keeping an eye on the next batch of U.S. economic data in the run-up to Friday's monthly government payrolls figures, which often set the market tone for a week or two after their release. A raft of better than expected run of U.S. economic news has helped ease concerns over the world's largest economy.

The rally was evident earlier in Asia, with Japan's Nikkei index closing up 1.7 percent at 8,522.63 and South Korea's Kospi index jumping 2.6 percent to 1,710.32. Hong Kong's Hang Seng index surged 5.7 percent to 17,172.28.

Markets in mainland China were closed for a holiday.

Oil prices tracked equities higher too — benchmark crude for November delivery was up $1.21 to $80.89 a barrel in electronic trading on the New York Mercantile Exchange. The contract rose $4.01 to finish at $79.68 on Wednesday alongside recovering share prices.


Kelvin Chan in Hong Kong contributed to this report.


EU to test bank capital for deeper Greek losses

Thursday, October 6th, 2011 | Finance News

BRUSSELS – European Union finance ministers have asked the bloc's banking supervisor to draw up a report on banks' capital levels, a European official said Thursday, amid fears that the worsening debt crisis could trigger another credit crunch.

Banks' ability to survive steeper losses on Greek debt will be one of the scenarios assessed in that report, the official said, adding that ministers plan to discuss the results at their next meeting in early November. The official was speaking on condition of anonymity because of the sensitivity of the issue.

German Chancellor Angela Merkel said Wednesday she was in favor of a coordinated recapitalization of European banks if that was deemed necessary.

Speculation that Europe is looking at a coordinated plan to recapitalize its banking sector has been the main reason why stock markets have rallied over the past couple of days following a dismal start to the week.

Franco-Belgian bank Dexia SA has been at the forefront of investor concerns this week over its exposure to potentially bad government debt and its share price has been under severe pressure. The French and Belgian governments have indicated that some sort of deal to save the bank could be announced later Thursday.

The International Monetary Fund, a key player in the eurozone debt crisis, said lenders across the continent may need as much as euro200 billion ($267 billion) to boost their capital cushions enough to restore a loss of confidence in the sector.

Some of that money could come from private investors via capital increases, but analysts expect that governments may have to put up significant amounts for lenders than can't raise money on the markets.

The EU disputes the IMF's euro200 billion estimate, but has nevertheless been pushing for a more coordinated response to the worsening conditions in the continent's banking sector, where lending between banks and from banks to businesses is threatening to freeze up in a manner similar to the aftermath of the collapse of U.S. investment bank Lehman Brothers in 2008.

However, some countries have been slow to set up sufficient backstops for their lenders, reluctant to commit more public money as they are already under pressure over their high debt levels.