May 12, 2021

Saudi Arabia Issues Its First Sovereign Islamic Bond

At 15 billion riyals, or $4 billion, it was the largest Islamic bond, or sukuk, ever issued within the kingdom. The sukuk, guaranteed by the Saudi Ministry of Finance, was oversubscribed three times, and the Saudi General Authority for Civil Aviation will use the proceeds to finance the expansion of King Abdulaziz International Airport in Jidda, the second-largest city in Saudi Arabia, after Riyadh.

The 10-year sukuk was sold in the domestic market, available only to Saudis. After months of uncertainty in Gulf capital markets because of the European debt crisis and the Arab Spring, analysts say the success of this sukuk will encourage more companies to come to market.

The last time a sukuk close to this size was sold was in July 2007, when the petrochemical giant Saudi Basic Industries Corp., or Sabic, raised 8 billion riyals.

Over the last three months, the Saudi government has been taking “bold initiatives to empower the Saudi capital markets,” said Mohamed Gouali, managing director and head of investment banking at Al Mal Capital in Dubai. The Saudi capital markets authority, for example, recently allowed foreign companies to be solely or dually listed on the Saudi stock exchange.

“They are now trying to revamp the sukuk capital market,” said Mr. Gouali, who formerly worked at Al Rajhi Bank, the largest Islamic bank in Saudi Arabia. “By starting off the first month of the year with a sukuk of this size, they are sending a strong message to the Saudi market and beyond that the government is ambitious about revitalizing debt markets.”

The fact that Greece, a country near default, successfully issued new three-month and 10-year bonds recently will positively affect the Gulf’s capital markets, he added.

In 2011, Saudi Arabian companies offered five Islamic bond issues worth a total of $2.76 billion, down from $3 billion raised from four sukuk sales in 2010, according to data from Zawya Sukuk Monitor. Over the past few years, the majority were by the largest companies in the kingdom, including Sabic and Saudi Electric. The aviation authority’s sukuk, however, is the first guaranteed by the government.

“It is not a matter of needing liquidity, but the need for a yield curve that will benefit banks which are sitting on a massive amount of liquidity and not lending,” said Yazan Abdeen, a portfolio manager at ING Investment Management in Dubai. “When a sukuk like this is issued, it helps suck up excess liquidity in the banks, which have few alternatives, and set up a yield curve.”

Analysts say that building a yield curve and ramping up the country’s capital markets are the main reasons for a government entity to raise funds through debt.

“It’s not like the government needs to raise money; Saudi has a budget surplus and debt levels have dropped,” said Eric Swats, head of asset management at Rasmala Investments in Dubai. “This could be the beginning of other domestic issues as more issuers come directly to the market.”

Saudi Arabia’s budget for 2012 envisions revenue of 702 billion riyals and spending of 690 billion riyals, according to details made public in December that factor in a modest oil price of $74 a barrel. The previous year’s budget included 580 billion riyals in spending.

“The increased use of capital markets to fund projects makes sense, given the increasing amount of government expenditure,” said Khalid Howladar, an analyst at Moody’s Investors Service in Dubai. The airport authority’s sukuk issue, he said, “is a very positive development for the market and is indeed a benchmark, given the rarity of high-quality sovereign issues.”

Article source: http://www.nytimes.com/2012/01/26/world/middleeast/26iht-m26-saudi-sukuk.html?partner=rss&emc=rss

French Borrowing Costs Edge Upward

The worries across Europe helped send the euro to its lowest in more than a year, to $1.279 from $1.294 late Wednesday in New York. European stocks were also down in late afternoon trading.

The French Treasury sold
€4 billion, or $5.1 billion, of 10-year bonds at an average yield of 3.29 percent, up from the 3.18 percent it paid at the last such auction in early December. Investors bid for 1.64 times the amount of the securities on offer.

The Treasury also sold €6.6 billion of longer-term debt: €2.2 billion maturing in 2023, €2.2 billion maturing in 2035, and €2.2 billion due in 2041.

Separately, the European Financial Stability Facility, the bailout vehicle for the euro zone, sold €3 billion of three-year bonds priced to yield about 1.77 percent. The sale, which had been planned for November before market turmoil led to its postponement, “met with orders of €4.5 billion from investors around the world,” the fund said.

Francis Yared, an interest rate strategist with Deutsche Bank in London, described the French auction as “mixed” and said the E.F.S.F. auction had been “executed smoothly,” though he said the market’s verdict would not be completely clear for a few days.

Attention was focused more on Italy, where shares of Unicredit, the largest Italian bank, were briefly suspended after falling by their limit for a second day in a row; and on Hungary, where changes by the center-right government to laws governing the Hungarian central bank risk alienating the International Monetary Fund and the European Union at a time that the government is looking for their help.

E.U. officials in Brussels warned again Thursday that Hungary must guarantee the central bank’s independence. “Now it’s really for the Hungarian authorities to decide how they want to reassure their international partners and the markets,” Olivier Bailly, an E.U. spokesman, said.

On Thursday, Tamas Fellegi, the Hungarian official who is conducting talks with the E.U. and I.M.F., sought to soothe concerns ahead of a debt auction, saying the government was ready to negotiate.

Yet market skittishness remained in evidence, as the Hungarian government sold only 35 billion forint, or $141 million, of the 45 billion forint in one-year Treasury bills offered Thursday, with the average yield rising to 9.96 percent — up sharply from the 7.91 percent it paid last month, according to Bloomberg News.

France’s debt sale, which came on the heels of a big German auction Wednesday, marked one of the first major tests of market demand in the new year for the bonds of embattled euro zone governments. Deutsche Bank estimates that euro zone governments have redemptions and coupon payments totaling €486 billion in the first quarter of the year, while banks must redeem about €214 billion.

France’s debt carries the coveted AAA mark at all of the major credit ratings agencies, but it is seen as having the most fragile finances among top-rated governments. Standard Poor’s last month warned that France’s rating was at risk after European leaders’ December effort to bolster the euro zone failed to convince investors. Moody’s Investors Service has also said it would review all European Union countries, including France, for a possible downgrade in the first quarter.

France’s 10-year bond yield, at 3.32 percent, is well above Germany’s 1.88 percent, as well as that of other AAA-rated euro nations including Finland’s 2.32 percent and the Netherlands’ 2.25 percent. By way of comparison, the United States’ 10-year bonds were trading to yield 2 percent, and Japan’s were at 0.98 percent.

The United States has already lost its AAA rating at one agency, with Standard Poor’s cutting it in August. S.P. said then that political dysfunction in Washington and slow growth had become a hindrance to addressing the country’s financial problems.

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French Borrowing Costs Nudge Upward in First Bond Sale of New Year

The French Treasury sold
€4 billion, or $5.1 billion, of 10-year bonds at an average yield of 3.29 percent, up from the 3.18 percent it paid at the last such auction in early December. Investors bid for 1.64 times the amount of the securities on offer.

The Treasury also sold €6.6 billion of longer-term debt: €2.2 billion maturing in 2023, €2.2 billion maturing in 2035, and €2.2 billion due in 2041.

The yield on the existing French 10-year bond barely moved, slipping 3 basis points to 3.28 percent. That compares with the 1.88 percent yield on the German 10-year, considered the safest in Europe. A basis point is equal to one-hundredth of a percent.

The euro was trading at $1.2843, down from $1.2943 late Wednesday in New York, and the lowest in more than a year. European stocks also were trading down at midday.

Market attention was focused more widely Thursday: on Italy, where shares of Unicredit, the largest Italian bank, were briefly suspended after falling by their limit for a second day in a row; and on Hungary, where changes by the center-right government to laws governing the Hungarian central bank risks alienating the International Monetary Fund and the European Union at a time that it is looking for their help in restoring market confidence.

On Thursday, Tamas Fellegi, the Hungarian official who is conducting talks with the E.U. and I.M.F., sought to soothe concerns ahead of a debt auction, saying the government was ready to negotiate.

But the market skittishness remained in evidence, as the Hungarian government sold only 35 billion forint, or $141 million, of the 45 billion forint in one-year Treasury bills offered Thursday, despite an average yield of 9.96 percent — up sharply from the 7.91 percent it paid last month, according to Bloomberg News.

France’s debt sale, which came on the heels of a big German auction Wednesday, marked one of the first major tests of market demand in the new year for the bonds of embattled euro zone governments. In all, euro zone governments need to sell more than €250 billion of debt in the first quarter, and euro zone banks are also lining up to roll over debt.

France’s debt carries the coveted AAA mark at all of the major credit ratings agencies, but it is seen as having the most fragile finances among top-rated governments. Standard Poor’s last month warned that France’s rating was at risk after European leaders’ December effort to bolster the euro zone failed to convince investors. Moody’s Investors Service has also said it would review all European Union countries, including France, for a possible downgrade in the first quarter.

The United States has already lost its AAA rating at one agency, with Standard Poor’s cutting it in August. S.P. said then that political dysfunction in Washington and slow growth had become a hindrance to addressing the country’s financial problems.

The French president, Nicolas Sarkozy, is facing a difficult re-election battle and has announced austerity measures in an effort to convince ratings agencies that France’s finances are on sustainable footing.

Mr. Sarkozy is scheduled to meet Monday with the German chancellor, Angela Merkel, to confer on strategy for overcoming the euro crisis.

The European Central Bank, which has been widely criticized for refusing to directly support struggling euro zone governments, on Dec. 8 did announce a major new initiative to help banks, saying it would provide unlimited three-year credit on easy terms against a wide range of collateral.

Liz Alderman contributed reporting.

Article source: http://www.nytimes.com/2012/01/06/business/global/french-borrowing-costs-nudge-upward-in-first-bond-sale-of-new-year.html?partner=rss&emc=rss

Stock Markets Recover Some Losses

Stock markets were modestly higher Thursday, just about recovering Wednesday’s losses, although many traders were still shying away from riskier assets at year-end.

In Italy, the government successfully tapped bond investors for more cash for the second day running.

But in a sign that nerves remained high, the euro was near a one-year low against the dollar and sank to a decade-low against the Japanese yen. In relatively thin trading, which often accentuates movements, the euro fell to $1.2883, its lowest level since Jan. 10 and not far from its 2011 low of $1.2860. Against the yen, it fell to 100.33 yen, a 10-year low.

In New York, the Standard Poor’s 500-stock index and the Dow Jones industrial average both closed up 1.1 percent. The Nasdaq composite index was 0.9 percent higher.

On Wednesday, the S.P. 500 fell 1.3 percent, while the Dow lost 1.1 percent.

Another bond auction from Italy’s monetary authorities did little to shore up stocks or the euro, even though borrowing rates fell for the second consecutive day. In total, Italy raised around 7 billion euros ($9.2 billion) in the four auctions.

In the most awaited auction, the Bank of Italy reported that Italy raised 2.5 billion euros ($3.3 billion) of 10-year bonds at an average yield of 6.98 percent. That is lower than the 7.56 percent it had to pay at an equivalent auction last month, when investor concerns over the ability of the country to service its huge debts became particularly acute and effectively prompted a change in government.

However, the country’s borrowing rate on the critical 10-year bond remained uncomfortably close to the 7 percent level widely considered to be unsustainable in the long run. Greece, Ireland and Portugal all had to request financial bailouts after their 10-year bond yields pushed above 7 percent.

In another sign of unease, banks continued to park large amounts of money overnight at the European Central Bank, reflecting strains in the interbank lending market and the central bank’s big 489 billion euro infusion of cheap, long-term credit into the banking system last week. The amount deposited overnight Wednesday was an elevated 436.58 billion euros, down from a record 452.03 billion euros from Tuesday.

The large deposits suggest banks are temporarily holding some of their borrowings from last week there. It also suggests that banks are afraid to lend to each other on the interbank market, preferring to hold cash risk-free at the central bank even at low interest rates.

In Europe, the FTSE 100 index of leading British shares closed up 1.1 percent, while the CAC 40 in France rose 1.8 percent. Germany’s DAX was 1.3 percent higher, though it had borne the brunt of the selling in the previous session.

Earlier in Asia, investors booked losses amid light trading. Japan’s Nikkei 225 index fell 0.3 percent to close at 8,398.89. Hong Kong’s Hang Seng Index closed 0.7 percent lower at 18,397.92.

Oil markets were subdued with the benchmark New York rate up 27 cents at $99.63 a barrel.

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Italy Sees Borrowing Costs Fall

But Rome’s financial position remains precarious and investors said it would require continued support from the European Central Bank to avoid seeing its funding costs rise again.

The auction of 10-year bonds was the first since the E.C.B. started buying Italian and Spanish debt in the secondary market three weeks ago — an extraordinary measure begun after their borrowing costs soared to 6 percent.

On Tuesday, the Italian Treasury sold €3.75 billion, or $5.4 billion, of 10-year securities at 5.22 percent. That compared to a rate of 5.77 percent at a sale of similar bonds in late July.

Demand at the auction was 1.27 times the amount on offer, down from the level at the last auction of 1.38 times. The Treasury also sold €2.99 billion of bonds maturing in 2014.

“Italy is still able to fund itself at ‘market rates’ but those are being artificially depressed by the E.C.B.’s bond buying,” said Eric Wand, an interest rate strategist at Lloyds Bank Corporate Markets in London.

He said that there had been speculation among traders that the E.C.B. had bought Italian bonds in the market after the auction. “If the E.C.B. was not around, the situation would be a lot worse,” Mr. Wand said.

The E.C.B. is not permitted under European treaties to buy bonds directly from governments, meaning it can only provide secondary market support.

The yield on the country’s benchmark 10-year bond was stable around the auction at about 5.13 percent. It has dropped more than 100 percentage points since the E.C.B. began buying Italian and Spanish debt on Aug. 8.

Italy had €1.6 trillion of debt at the end of last year, according to its debt management office, making it Europe’s biggest national bond market.

Seeking to address concerns about its fiscal position, Prime Minister Silvio Berlusconi and other senior officials met Monday to amend a recently drawn-up fiscal package designed to net €45.5 billion in savings. Among the changes being discussed are dropping a tax on the high earners and limiting funding cuts to regional governments, Bloomberg News reported from Rome.

The Lower Chamber of Parliament will start debating the program next week and it is expected to be voted on by mid-October.

Euro-area governments are working on ratifying changes aimed at bolstering the region’s primary bailout mechanism, known as the European Financial Stability Mechanism. But analysts said that will take time and in the interim, countries like Italy and Spain will continue to need support from the E.C.B.

Last week, the bank bought €6.651 billion in euro-area bonds, and that figure is expected by analysts to rise this week.

Spain is also planning a bond sale of five-year paper on Thursday.

While the Italian bond auction appeared tepid, there was also more evidence Tuesday that the European economy is slowing amid the escalation in the sovereign debt crisis and recent turmoil in financial markets.

The European Commission’s economic sentiment index for the euro area fell to 98.3 in August from a revised 103.0 in July. The reading was lower than analysts’ estimates of 100.5 and was the lowest level since February 2010.

The weakening in sentiment in August was across the board, with both industry and services confidence shedding around 4 percentage points, while consumer confidence was down more than 5 percentage points.

“All in all the current level of the economic sentiment indicator, if confirmed in September, probably indicates that the recovery in the euro-zone has come to a standstill,” said Peter Vanden Houte, an analyst at ING. “A small negative growth figure in the third quarter seems no longer excluded.”

Bucking the general trend, however, Italian business confidence unexpectedly rose in August as manufacturers become more optimistic about demand for their goods, another report showed.

Over all, the recent data on the economy and growth are adding to expectations that the inflation rate in the euro area may have peaked.

Jean-Claude Trichet, the E.C.B.’s president, told a committee of the European Parliament on Monday that the economic recovery might be weaker than expected, suggesting the bank might lower its growth and inflation assessments.

Preliminary inflation figures for August from Germany and Spain have both been below market expectations. Euro-area data will be released Wednesday.

Stock markets were mixed Tuesday. The FTSE-100 rose by over 2 percent in London, following a public holiday in Britain Monday. But other European indexes declined. The SP 500 futures contract slid 0.5 percent, indicating a weaker start on Wall Street.

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Debt in Europe Fuels a Bond Debate

President Nicolas Sarkozy of France and Chancellor Angela Merkel of Germany are scheduled to meet in Paris on Tuesday but have vowed to avoid the issue of euro bonds altogether. Nonetheless, a number of analysts say that eventually they may have no choice if they want to keep Europe’s currency union from falling apart.

The euro bond concept is gaining traction among economists and other outside experts like George Soros, the billionaire investor, as a way of preventing borrowing costs for Italy and Spain from rising so much that the countries become insolvent, an event that could destroy the common currency.

Debt issued and backed by all 17 members of the euro zone, euro bond proponents say, would be regarded as ultrasafe by investors and could rival the market for United States Treasury securities. The weaker euro members would benefit from the good standing of countries like Germany or Finland and pay lower interest rates to borrow than if left to face investors on their own.

“It may well be in order to calm markets right now,” said Jakob von Weizsäcker, an economist for the German state of Thuringia who has proposed a way to structure euro bonds so that countries would be encouraged to reduce their debt.

Data released Monday by the European Central Bank underlined how costly it would be to keep Italian and Spanish borrowing costs under control, and added urgency to the euro bond debate. Bond yields on Italian and Spanish debt, which recently rose above 6 percent, have fallen sharply since the central bank said it would start buying the bonds. The yield on Spanish 10-year bonds fell to 4.942 percent Monday, the lowest level in months. Italy’s benchmark yield was just below 5 percent.

But the central bank disclosed that it had spent 22 billion euros($31.8 billion) intervening in bond markets just last week to hold down Spanish and Italian bond yields. That compared with 74 billion euros the bank spent in the previous 15 months, when it focused on the smaller markets for Greek, Portuguese and Irish bonds.

Euro bonds are a deeply controversial idea among both economists and ordinary Europeans. Critics said they would not solve the financial crisis and might create unbearable political tension instead. Voters in stronger countries would balk at assuming the obligations of less prudent members. Some critics argued that euro bonds would unfairly raise borrowing costs for countries like Germany, and, rather than protecting the euro, could lead to the breakup of the currency union.

“Euro bonds could trigger very strong anti-European movements,” said Clemens Fuest, a professor at Oxford. “It would be very hard to sell in Germany.”

The euro bonds debate reflects what is perhaps the central existential question facing Europeans: how much more central government and integration are they willing to accept to save the euro?

In Germany, the answer so far is that euro bonds go too far toward a so-called transfer union where the rich and solvent subsidize the poor. Asked about the issue, Mrs. Merkel’s office said she endorsed a statement by the finance minister, Wolfgang Schäuble, who told the newsmagazine Der Spiegel that he ruled out euro bonds as long as countries pursued their own fiscal policies.

Different interest rates are needed to provide “incentives and sanctions, in order to enforce solid fiscal policy,” Mr. Schäuble told Der Spiegel. “Without such solidity there is no foundation for a common currency.”

Steffen Seibert, a German government spokesman, said Monday that euro bonds were not on the agenda for the meeting between Mr. Sarkozy and Mrs. Merkel. “The German government has said on numerous occasions that it does not believe euro bonds make sense, and that’s why they will not play any role at tomorrow’s meeting,” Mr. Seibert said, according to Reuters.

Article source: http://www.nytimes.com/2011/08/16/business/global/debt-crisis-in-europe-fuels-debate-over-bonds.html?partner=rss&emc=rss

A Daunting Path to Prosperity

But things got tangled — as they often do in Italy, where bureaucracy and politics can easily overwhelm economics.

Each application that Ikea filed seemed to require yet another. Each mandatory impact study begat the next. By May, when a local mayor had still not decided whether the company could get a building permit, Ikea put out word it would abandon the plan.

As Italy teeters on the edge of the European debt crisis, it can ill afford more debacles like that one. Otherwise, despite having the world’s seventh-largest economy, Italy may have little hope of outgrowing the staggering debt load that could threaten its financial future — and that of the euro monetary union.

Already, investors seem skeptical whether Italy and other debt-saddled European countries can right themselves, despite the financial rescue plan for Greece that Europe’s leaders agreed to last week.

On Thursday, Italy’s borrowing costs jumped almost a full percentage point at an auction of 10-year bonds, compared with just one month ago. At 5.77 percent, the interest rate was more than twice what financially buoyant Germany must pay on bonds of the same maturity. As higher interest rates make it even harder for Italy to reduce its debt, the main recourse would seem to be faster growth.

“This is the only major issue for Italy now — to resume growth,” said Francesco Giavazzi, an economics professor at Bocconi University and a research fellow at the Center for Economic Policy Research in London.

Italy must not only encourage big corporate investments like the Ikea project, experts say, but it must also remove impediments that stifle growth in the thousands of small and medium-size companies that make up the backbone of its economy.

One small-business man, Mauro Pelatti, says he has given up on expanding his business in Florence, an hour east of here. “Bureaucracy is so strong, and taxes are so high, that it’s virtually impossible,” said Mr. Pelatti, whose privately held company, Omap, makes parts for steel-stamping machines used on products like Vespa scooters.

Italy’s economy experienced paltry growth starting in the late 1990s, when the country’s manufacturing was overtaken by competitors in Asia. Then came the global financial crisis in 2007, which shrank Italy’s economy by more than 6 percent.

Growth has resumed, but the International Monetary Fund predicts “another decade of stagnation,” with Italy’s gross domestic product expanding by only about 1.4 percent annually in the next few years. (The German economy, Europe’s growth leader, grew 3.5 percent in 2010 and grew by 1.5 percent in the first quarter compared with the same period a year ago.)

Hindering growth is Italy’s heaving government debt, which at 119 percent of gross domestic product is second only to Greece’s among euro zone members. Although it has run a budget surplus, minus debt costs, for several years and recently passed a 48 billion deficit-reduction plan, the Italian government now spends 16 percent of that budget on interest payments — a bill that will rise if investors and creditors continue to fear that Italy cannot escape Europe’s debt crisis.

Currently, the amount of Italy’s debt held by foreigners — nearly 800 billon euros — is more than that of Greece, Ireland and Portugal combined. Should Italy stumble, the aftershocks would be more disruptive than anything the euro zone has felt so far in the crisis.

The barriers to growth make for a daunting list. For starters, national leaders like Prime Minister Silvio Berlusconi and even mayors of the smallest towns tend to be caught up in politics that distract them from the economy’s plight. What is more, productivity has been flat for a decade. And corporate taxes are around 31 percent, not counting an array of local taxes assessed to businesses.

Gaia Pianigiani contributed reporting from Rome.

This article has been revised to reflect the following correction:

Correction: July 29, 2011

An earlier version of this article misspelled the name of Mario Carraro and his company as Carrero.

Article source: http://www.nytimes.com/2011/07/29/business/economy/italy-faces-a-long-list-of-barriers-to-growth.html?partner=rss&emc=rss

Dow Retreats for Fifth Straight Day

It was a disappointing, but perhaps not surprising, turnaround to the day’s trading, in which the three main stock indexes posted slight gains through most of the day before losing steam.

Stocks in the Dow have now retreated for a fifth consecutive trading day. The Dow closed down 62.44 points, or 0.51 percent, to 12,240.11. The Standard Poor’s 500-stock index lost 4.22 points, or 0.32 percent, to 1,300.67. But the Nasdaq composite index was up 1.46 points, or 0.05 percent, to 2,766.25.

Still, the declines on Thursday were not as steep as in previous days.

“The anxiety level is clearly rising but I think there is a reluctance in the markets for investors to sell in to that anxiety,” said Russell Price, a senior economist with Ameriprise Financial

But he added: “The closer we get to that 11th hour, the more questionable that becomes.”

The yield on the benchmark 10-year Treasury note fell to 2.95 percent, compared with 2.98 percent late Wednesday.

The Dow has declined more than 3 percent since last Thursday as Congress failed to agree on plans to cut the government deficit and raise the debt ceiling; it is down about 1 percent for the month.

Other factors have compounded the markets’ unease. In Europe, despite a recent deal aimed at addressing fiscal problems in Greece, fresh nervousness bubbled up over other euro zone countries.

Kevin H. Giddis, the executive managing director and president for fixed-income capital markets at Morgan Keegan Company, said investors saw a disappointing auction of Italy’s 10-year bonds.

“Investors appear to have, temporarily at least, shifted their gaze away from the backs-and-forths in the debt ceiling debate and towards the economic challenges in the euro zone,” said Mr. Giddis in a research note.

In the United States, investors had plenty of fresh economic and corporate material to pick through for clues to a recovery.

On Thursday, the Labor Department reported that initial claims for jobless benefits last week dipped below the 400,000 level, a threshold that some economists say indicates an improving the jobs market. Total initial jobless claims fell to 398,000, below analysts’ forecasts of 415,000, in the week ended July 23, a level that Goldman Sachs economists called a “tentative positive.”

Such data is subject to seasonal adjustments and revisions, but the four-week moving average, considered a more reliable indicator of the job market, also declined.

“Unfortunately, we will need to see next week’s claims figures to get more clarity on the true cause,” Goldman Sachs said in a research note.

Pending home sales also rose in June, showing a small 2.4 percent gain that could lead to a gain in completed sales in the coming months, another survey showed.

The debt-ceiling stalemate is affecting at least some economic activity, with some businesses delaying decisions, according to analysts and a recent Federal Reserve report. Estimates for growth of the nation’s gross domestic product in the second quarter are scheduled to be released on Friday, and analysts predicted it would be slightly below the first quarter’s 1.9 percent annualized rate.

Technology shares were the best performing sector in the broader market. Shares of the LSI Corporation were up more than 14 percent at $7.35 after its results on Wednesday beat expectations for revenue, which was up 6 percent to $501 million, and issued a strong outlook.

Exxon Mobil reported strong second-quarter earnings, but they were a bit lower than forecast. Its stock was down more than 2 percent at $81.46.

And on the Nasdaq, Green Mountain Coffee Roasters rose more than 16 percent to $102.57. It reported on Wednesday that fiscal third quarter net income more than doubled to $56.3 million and that it was expecting strong growth in the fourth quarter.

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Spain and Italy Turn Against Greece Over Reform Efforts

Gloomy investors on Monday drove down Europe’s stock indexes by about 2 percent, while the euro fell nearly 1 percent against the dollar, touching a two-month low.

Meanwhile, yields rose on 10-year Spanish and Italian bonds, reflecting a market perception that the risks are rising that those two indebted nations might be following the downward spiral of Greece. Greek 10-year bonds reached a record 16.8 percent as investors demanded a high premium for holding them.

On Wall Street, major stock indexes were also down more than 1 percent, in part over the uncertainties in Europe.

The markets seem to reflect the growing discord within the 17-member euro zone currency union, barely a year after European governments came together with a 750 billion euro ($1 trillion) safety net for debtor-nation members. Tensions also remain over whether to restructure Greece’s debt and force bondholders to take losses.

It is clear that the bailout package and the austerity terms imposed on Greece have deepened its recession and added to its already substantial debt burden. The debate now is whether making more cuts and recharging a program to privatize many formerly government-run agencies and social services in Greece will be enough to persuade a reluctant Europe to lend the country another 60 billion euros.

“It looks like a real unraveling — everyone is taking their own position and as a result cooperation has become an impossibility,” said Paul De Grauwe, an economist in Brussels who advises the president of the European Commission, José Manuel Barroso.

The discord has become increasingly apparent since Greece’s financial decision makers were summoned to secret talks at a Luxembourg castle by their currency partners this month.

The Greeks probably knew that a tongue-lashing over the country’s stumbling financial overhaul effort was coming. What they probably did not expect was that beleaguered Spain and Italy, as opposed to economically robust Germany, would take the lead in upbraiding them.

The meeting, on May 6, showed that the disagreements in the euro zone were not just between richer northern countries like Germany and the less wealthy south.

Struggling countries like Spain and Italy fret that any Greek failure on spending cuts might cause investors to conclude that those two countries have no better growth prospects than Greece — even as their own austerity programs cause social and political unrest.

On Monday, the bond market seemed to fulfill Spain and Italy’s worst fears about being lumped in with Greece’s as a poor investment risk and the perception that the cuts meant to ease those countries’ debts will instead mire them deeper in recession.

Ten-year yields for Italian bonds edged up to 4.8 percent on Monday, from 4.7 percent last week. Rates for Spain’s comparable bonds rose to 5.5 percent, up from 5.2 percent. Euro zone unity has always been a challenge to maintain, given the member countries’ contrasting histories and cultures. That it should be crumbling barely a year after European governments agreed to a rescue package underscores the difficulty in translating grand policy ideals into workable achievements.

And that it is Spain and Italy now stressing the necessity of austerity — not Germany or the European Central Bank — is further evidence that bond market investors continue to be the most powerful voice in this debate, Mr. De Grauwe said.

Southern countries, he said, are afraid of contagion from Greece’s woes. “But history shows us that you cannot cut deficits in the midst of a recession.”

For Spain, devastating local election losses on Sunday by the governing Socialist Party created worries that Madrid’s plan to cut its budget deficit might founder. It had planned to reduce the deficit to 6 percent of gross domestic product this year in the face of a 20 percent unemployment rate.

Many Spaniards have now taken to the streets in protests organized through social media. (Spain’s deficit was 9.24 percent of gross domestic product in 2010.)

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Uneven Nature of Recovery Highlighted in Europe

PARIS — The uneven nature of the European recovery was underlined by data released Thursday, which showed prices rising and weak consumption across the euro zone. Portugal’s budget situation worsened even as the economic picture in France and Germany improved.

Officials in Portugal blamed the higher-than-expected deficit figure for 2010 on changes in accounting rules. But coming on the heels of a government collapse and two downgrades, investors sent yields on its 10-year bonds soaring to a new euro-era high, raising the pressure as the country struggles to avoid having to ask for a financial rescue.

Portugal’s woes are worsened by a weak economy and rising prices.

For the entire euro area, the European Union’s statistics agency reported that annual inflation rose to 2.6 percent in March from 2.4 percent in February, according to an initial estimate.

Analysts said higher oil and food prices remained the main factors behind the rise. But they added that the tightening labor market in countries such as Germany, as well as potential price increases by companies facing higher commodity costs, are likely to push up core inflation over the coming months. Core inflation excludes the more volatile energy and food categories.

The Federal Labor Agency in Germany reported that the largest economy in Europe continued to add jobs in March. German unemployment dropped by a seasonally adjusted 55,000 for the month, bringing the jobless rate down to 7.1 percent, from 7.3 percent in February. It was the lowest unemployment rate since the country’s reunification in 1990, according to economists.

At the same time, a separate report from the Federal Statistical Office showed that German retail sales fell by 0.3 percent in February from January, when they had risen 0.4 percent.

Carsten Brzeski, at analyst at ING in Brussels, said the data “again illustrated the German economy’s main dilemma: While the labor market remains the show case of the recovery, private consumption is still sluggish.”

The strong job market is only gradually lifting consumption because many of the jobs created pay low wages, while higher energy prices have dampened spending, he said.

The latest data have solidified expectations that the European Central Bank next week will raise borrowing costs for the euro area, given that inflation is riding well above its comfort zone of just below 2 percent. Analysts at Barclays Capital said there is also a growing expectation such an increase might be repeated.

Chiara Corsa, an economist at UniCredit Bank in Milan, said euro-zone inflation was likely to pick up throughout the summer, before starting to decline at the turn of the year. UniCredit expects an average 2.6 percent in 2011 and 2 percent next year.

In Lisbon, the national statistical office said that Portugal’s budget deficit last year was 8.6 percent of G.D.P., well above the target of 7.3 percent. The finance minister Fernando Texeira dos Santos said that the difference was due to new E.U. accounting rules, and not as a result of unreported items, Reuters reported.

He said the impact on public accounts would be limited to 2010 and that the 2011 budget goal would not be at risk. He also said the caretaker government would have enough funds to meet obligations until a new government takes office.

Yields on Portuguese government bonds pushed to fresh records as investors bet on a near-term bailout. The benchmark 10-year issue rose 21 basis points to 8.1 percent, while the 2-year note climbed 53 basis points to stand at 8.2 percent, showing that the same high returns are now being demanded for holding Portuguese paper of all maturities. Spanish and Irish yields also climbed.

By contrast, the French statistics agency reported Thursday that the country registered a narrower budget deficit of 7 percent of gross domestic product last year, from 7.5 percent in 2009 and was under the government’s own target, which had initially stood at 8.5 percent.

Germany had a budget shortfall of 3.3 percent of G.D.P. last year, the according to data released last month.

Nevertheless, President Nicolas Sarkozy, currently in Asia, was quick to claim credit for the better than expected performance in France, which is likely to feature as a key theme in next year’s presidential election.

His office issued a statement saying that the data confirmed the effectiveness of government’s strategy based on economic reforms and strict spending control, “while refusing a general increase in taxes, which would prejudice growth and competitiveness.”

The ratings agency Fitch displayed less optimism for the region as a whole. It lowered its economic forecasts Thursday, “reflecting the persistent drag from fiscal consolidation, as well as lower consumption and tighter monetary policy in the context of higher oil prices.”

Fitch reduced its euro area G.D.P. forecast by 0.4 percentage point to 1.2 percent for this year, and by 0.3 percentage point to 1.8 percent for 2012.

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