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Stocks and Bonds: Markets Jump in U.S. and Europe on Hopeful Signs

December 21, 2011 by Leave a Comment

Analysts said the markets were helped by a successful auction of three-month bills in Spain. Also, a report showing improved business sentiment in Germany, Europe’s largest economy, offered a glimmer of hope.

The Dow Jones industrial average turned positive for the month and bank shares were up more than 3 percent. Over all, it was a reversal of the drag on the entire stock market on Monday, when financial stocks fell by more than 2 percent, partly as focus shifted to a warning by the European Central Bank of a perilous year ahead.

But with no stunning news event or resolution to the financial markets’ persistent irritants, some questioned the reasons behind the size of the surge on Tuesday.

“I cannot explain today’s action in the market,” Gary M. Flam, an equity portfolio manager at Bel Air Investment Advisors, said in the final hour of trading. “There has been no news, either positive or negative, to drive a move of this magnitude. I could try to explain it away, but a move of this magnitude is head-scratching.”

At the close, the Dow Jones industrial average was up 337.32 points, or 2.9 percent, at 12,103.58. The Standard Poor’s 500-stock index showed a gain of nearly 3 percent to 1,241.30. The index’s 35.95 point gain was the seventh-best of this year. The Nasdaq composite index was up 80.59 points, or 3.2 percent, at 2,603.73.

As stocks soared, investors left the safety of government bonds. The Treasury’s 10-year note tumbled 1 2/32, to 100 21/32. The yield rose to 1.93 percent, from 1.81 percent late Monday.

Many analysts also noted that wild swings were a predictable feature of the end of the year as managers balanced underperforming elements in their portfolios at a time of low trading volume. And even after an impasse over extending a payroll tax cut was announced Tuesday in Washington, the markets held on to their gains.

“The market just seems to have no memory from one day to the next,” Mr. Flam said. “To drive a move of this magnitude, you would expect there to be some sort of resolution on the bigger-picture issues.”

The sovereign debt crisis in the euro zone and the prospects of sluggish economic growth have ganged up on the financial markets in recent months. But the data has sometimes broken through the gloom, pointing to a recovery that is sluggish but at least is not stalled.

On Tuesday in the United States, government data showed that housing starts in November hit their highest level since April 2010. They reached 685,000, a seasonally adjusted annualized pace surpassing forecasts of 635,000 and up more than 9 percent compared with October. Building permits also exceeded expectations, reaching 681,000, data from the Commerce Department showed.

And a survey released on Tuesday by the Ifo research group in Munich showed that the business climate for trade and industry in Germany, which is Europe’s largest economy, continued to improve in December. “The German economy seems to be successfully countering the downturn in Western Europe,” the report said.

Stanley Nabi, the chief strategist for the Silvercrest Asset Management Group, said that the economic reports in the United States and from Europe showed they were “not doing as badly as expected, and this morning the housing data came out much stronger than expected.”

In addition to recent higher expectations for growth, he said, “all of these things combined have given a measure of comfort” to investors.

The Euro Stoxx 50 index closed 2.7 percent higher. The major indexes were up 3.1 percent in Germany, 2.7 percent in France and 1 percent in Britain. The German 10-year bond rose 8 basis points to yield 1.95 percent.

In the euro zone bond market, where sovereign debt concerns have been overriding, the Spanish auction of three-month bills priced to yield 1.74 percent helped sentiment, an analyst said.

“We are still a long way from a fix to Europe’s problems, but any ease in funding pressures among member economies is certainly a welcomed development,” said Kevin H. Giddis, the executive managing director and president for fixed-income capital markets at Morgan Keegan Company, referring specifically to Spain.

As the euro rose and the United States dollar retreated about 0.5 percent on its index, energy and materials stocks on the broader market surged nearly 4 percent. Oil prices rose more than 3.5 percent, with crude for January delivery on the New York Mercantile Exchange at $97.35.

Bank of America shares, which closed below $5 on Monday, their lowest point since March 2009, were up 3.7 percent Tuesday at $5.17.

ATT was up more than 1.3 percent to $29.12. It announced after the markets closed on Monday that it would end its bid to acquire T-Mobile USA.

Article source: http://feeds.nytimes.com/click.phdo?i=7450b6c3bb7e626c2d9db68c813203fd

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Stocks and the Euro Rise in Quiet Trading

November 24, 2011 by Leave a Comment

PARIS — European stocks and the euro were higher Thursday in quiet trading after a rating agency cut Portugal’s sovereign debt rating to “junk,” or below investment grade.

The decision by Fitch Ratings to cut Portugal’s sovereign debt rating one notch, to BB-plus from BBB-minus, served as a reminder of the dangers hanging over the euro zone.

Fitch cited its forecast for Portugal’s economy to contract by 3 percent next year, saying “the recession makes the government’s deficit-reduction plan much more challenging and will negatively impact bank asset quality.” Moody’s Investors Service cut the bonds to junk in July, while Standard Poor’s rates them just above that level.

A private research institute’s economic report, meanwhile, showed business sentiment improving in Germany, the largest economy on the Continent.

The Ifo institute said its main business climate index for Germany improved in November to 106.6 from 106.4 in October, the first uptick in four months, and a sign that the German economy “is still performing relatively well despite the international turmoil.”

With markets in New York closed for the Thanksgiving holiday, trading volume was subdued, particularly in contrast from a day earlier. On Wednesday, global equity markets and bonds were upended by the failure of the German government to sell a large portion of the debt it was auctioning, sparking fears that investors might have lost faith in all euro-zone sovereign assets.

In afternoon trading, the Euro Stoxx 50 index, a barometer of euro zone blue chips, rose 1.3 percent, while the FTSE 100 index in London gained 0.2 percent.

German 10-year bonds, which became the focus of attention on Wednesday, continued to fall in price. The yield, which moves in the opposite direction, rose 5 basis points to 2.19 percent. A basis point is one-hundredth of a percent. Portuguese 10-years were trading to yield 10.84 percent, up 27 basis points.

Standard Poor’s 500 index futures rose 0.8 percent. The SP 500 fell 2.2 percent on Wednesday.

The euro rose to $1.3376 from $1.3341 late Wednesday in New York, while the British pound fell to $1.5522 from $1.5555. The dollar fell to ¥77.13 from ¥77.31, and to 0.9185 Swiss francs from 0.9201 francs.

Neil Mellor, a currency strategist at Bank of New York Mellon in London, said there was a feeling in the market “that we’re getting to a tipping point, that we’re definitely close to something,” but he expressed optimism that the Continent would weather the storm.

He said the euro’s level against the dollar, above last year’s low and well above its historical average of around $1.15, suggested that the market was “inclined to give the euro a break.”

“Against the backdrop of a permanent crisis in the euro zone, you have to ask why the euro remains at these levels,” Mr. Mellor said. “That speaks volumes about the market’s view of the euro.”

U.S. crude oil futures rose 0.3 percent $96.50 a barrel. Comex gold futures rose 0.2 percent to $1,701.80 an ounce.

Asian shares were mixed. The Tokyo benchmark Nikkei 225 stock average, which had been closed Wednesday for a holiday, fell 1.8 percent, catching up with the global sell-off. The Sydney market index SP/ASX 200 lost 0.2 percent. In Hong Kong, the Hang Seng index gained 0.4 percent and in Shanghai the composite index added 0.1 percent.


Article source: http://www.nytimes.com/2011/11/25/business/global/daily-stock-market-activity.html?partner=rss&emc=rss

Filed Under: Global Business Tagged With: , ,

Second-Quarter G.D.P. Revised Down to 1%

August 26, 2011 by Leave a Comment

WASHINGTON — The American economy grew much slower than previously thought in the second quarter, as business inventories and exports were less robust, a government report showed on Friday, although consumer spending was revised up.

Gross domestic product rose at annual rate of 1.0 percent, the Commerce Department said, a downward revision of its prior estimate of 1.3 percent. It also said after-tax corporate profits rose at the fastest pace in a year.

Economists had expected output growth to be revised down to 1.1 percent. In the first quarter, the economy advanced just 0.4 percent. The government’s second G.D.P. estimate for the quarter confirmed growth almost stalled in the first six months of this year.

The United States is on a recession watch after a huge sell-off in the stock market knocked down consumer and business sentiment. The plunge in share prices followed Standard Poor’s decision to strip the nation of its top notch AAA credit rating and a spreading sovereign debt crisis in Europe.

While the outlook has deteriorated, data such as industrial production, retail sales and employment suggest the economy could avoid an outright contraction.

The G.D.P. report comes as central bankers from around the globe gathered for a conference in Jackson Hole, Wyo.

Ben S. Bernanke, the Federal Reserve chairman, was to deliver the keynote address on Friday, which will be watched for any sign that a further easing of American monetary policy is on the way to support the ailing economy.

The downward revisions to second-quarter growth came as businesses accumulated less stock than previously estimated. Business inventories increased $40.6 billion instead of $49.6 billion, cutting 0.23 percentage point from G.D.P. growth during the quarter.

However, the slow build-up of inventories means goods are not piling up on shelves, which should support growth in the third quarter. Excluding inventories, the economy grew at a 1.2 percent rate.

Output was also curbed by exports, which grew at a 3.1 percent pace instead of the previously estimated 6.0 percent. Imports increased at a 1.9 percent rate rather than 1.3 percent. That left a slightly wider trade deficit and trade barely contributed to G.D.P. growth. Trade had previously been estimated to have added 0.58 percentage point to overall output.

The drag from business inventories was offset by consumer spending, which was revised up to a 0.4 percent rate from 0.1 percent. The increase in spending, which accounts for more than two-thirds of American economic activity, was still the smallest since the fourth quarter of 2009.

Business spending was revised to a 9.9 percent rate of increase from 6.3 percent as investment in nonresidential structures and equipment and software was stronger than previously estimated. But there are fears that the recent stock market rout could make businesses a bit hesitant to spend on capital and hiring.

The report also showed that after-tax corporate profits increased 4.1 percent in the second quarter after edging up 0.1 percent in the first three months of the year. It also showed inflation pressures abating, with the personal consumption expenditures price index rising at a 3.2 percent rate. That compared to 3.9 percent in the first quarter.

Article source: http://www.nytimes.com/2011/08/27/business/economy/second-quarter-gdp-revised-down-to-1.html?partner=rss&emc=rss

Filed Under: Global Business Tagged With: , ,