The Week in Review for the week ending July 13, 2012
Continued disappointing global economic news led major stock indices downwards for the majority of last week. However, China’s weak second-quarter economic growth report led to speculation over upcoming government stimulus measures and equity markets rose strongly Friday.
Moody’s Investor Service downgraded Italy’s credit rating two notches in recognition of rising regional economic risks.
US economic data gave a more tempered look, with a mix of readings on the economy. Corporate earnings reports gave signs that the global slowdown could squeeze profits.
The euro continued its months-long slide as the eurozone debt crisis and regional recession wore on.
Amid this environment the DJIA was up 0.04%, the S&P 500 was up 0.2%, the Russell 2000 was down -0.8%, the Global Dow Ex-US was down -1.1% and crude oil rose 3.1%.
China’s gross domestic product grew 7.6% from a year earlier in the second quarter, down from 8.1% annual growth in the first quarter. This is the country’s slowest pace of economic growth since the first quarter of 2009. China also reported this week that imports grew in June by just 6.3% from a year earlier while exports rose 11.3%, leading to a much greater trade surplus. The country’s consumer price index rose just 2.2% in June from a year earlier.
Economic growth in major economies is expected to slow in the coming months, according to the Organization for Economic Cooperation and Development’s leading indicators. Among developed economies, the eurozone was flagged as the main source of weakness, and the overall outlook was more downbeat for developing economies, including China, India, and Russia. The OECD predicted a pickup in activity in Brazil.
European industrial output rebounded unexpectedly in May, according to the European Union’s statistics office. Output rose 0.6% from April, but fell 2.8% from May 2011. Germany led the rebound, with its industrial production rising 1.5% in May. In a separate report, consumer price inflation in Germany fell in June to 1.7%, its lowest level since December 2010, according to Destatis, the country’s federal statistics office.
Moody’s Investors Service lowered Italy’s government bond rating two notches, noting that the country’s economy continues to weaken and faces fragile market confidence, a deteriorating overseas investor base, and heightened liquidity risk.
Spain announced new austerity measures as it tried to trim its budget deficit. The new measures include value-added tax hikes, lower unemployment benefits, and state employee wage cuts. The measures build on previous austerity actions, including an income tax increase and sharp budget cuts in all government ministries. Spain is already reeling economically, with 25% unemployment and an estimated economic contraction of 1.7% this year. Eurozone finance
ministers gave Spain a break, pushing back by one year a deadline to bring its budget deficit in line with the region’s standards and loosening the current year’s budget deficit target to 6.3% of GDP from the previous goal of 5.3%. Spain’s current deficit is 8.9% of GDP.
Brazil cut its benchmark interest rate to a record low, while South Korea’s central bank unexpectedly lowered its key interest rate for the first time in more than three years. South Korea also lowered its outlook for 2012 economic growth for the second time this year and is now expecting 3% annual growth. Brazil has been aggressively applying stimulus measures –– including rate cuts, tax cuts, and subsidized lending –– for a year, but continues to see disappointing results.
US economic reports were a mixed bag last week. Consumer credit expanded in May at the fastest pace in five months, according to a US Federal Reserve Board report. However, Friday morning’s preliminary consumer sentiment reading from Thomson Reuters/University of Michigan dipped to its lowest level since last December.
Weekly initial jobless claims fell by 26,000 to 350,000, the lowest level in four years, but analysts peg some of that drop to auto industry decisions not to close factories temporarily in order to retool in the first week of July, when they normally have.
US producer prices edged higher in June, rising by 0.1%, although they were expected to drop 0.5%.
US mortgage rates fell to record lows for the fourth straight week. The average rates for 30-year and 15-year fixed-rate mortgages were 3.56% and 2.86%, respectively.
JPMorgan Chase, the largest US bank by assets, reported an 8.7% decrease in second-quarter earnings and double-digit drop in revenue while reporting a $4.4 billion trading loss at its chief investment office. The bank also said it would restate its first-quarter results to reduce earnings and revenue after further investigation into the valuation of portfolio losses. Trading losses related to a failed hedging strategy now total $5.8 billion. The bank said the losses could grow by up to $1.7 billion more in a worst-case scenario.
Wells Fargo posted a 17% rise in second-quarter earnings as its mortgage banking income rose and its credit loss provision declined. The bank originated twice the volume of mortgages than it did in the year-earlier period. Revenue rose 4.4%, just shy of expectations. Wells Fargo, the country’s largest mortgage lender, will pay at least $175 million to settle claims that it discriminated against black and Hispanic borrowers. The case involves at least 34,000 minority borrowers who were charged higher fees or were sold risky subprime mortgages when they could have qualified for a prime mortgage with a lower fee. Rival Bank of America agreed to pay $335 million last November to settle a similar case.
Alcoa, the largest US aluminum producer, beat analysts’ estimates for second-quarter earnings and revenue on an increase in demand from the auto and aerospace industries. However, it posted a loss of $2 million after a net profit of $322 million a year ago. Alcoa has been hurt by a recent decline in aluminum prices as well as higher raw materials costs.
French car maker Peugeot said it will eliminate 8,000 jobs and close one of France’s largest car factories in 2014, the first such closure in France in more than a decade, in response to a significant slump in sales.
German software giant SAP notched a 7% increase from a year earlier in its second-quarter operating profit. Quarterly license sales rose 26%, the company announced in a pre-release of part of its second-quarter results.
Supermarket giant Supervalu, struggling with declining traffic at its 4,400 grocery stores (including Albertson’s and Shaw’s), is considering selling all or part of the company and will suspend its quarterly dividend. Supervalu’s earnings fell 45% in the most recent quarter.
The Week in Review for the week ending July 13, 2012
Continued disappointing global economic news led major stock indices downwards for the majority of last week. However, China’s weak second-quarter economic growth report led to speculation over upcoming government stimulus measures and equity markets rose strongly Friday.
Moody’s Investor Service downgraded Italy’s credit rating two notches in recognition of rising regional economic risks.
US economic data gave a more tempered look, with a mix of readings on the economy. Corporate earnings reports gave signs that the global slowdown could squeeze profits.
The euro continued its months-long slide as the eurozone debt crisis and regional recession wore on.
Amid this environment the DJIA was up 0.04%, the S&P 500 was up 0.2%, the Russell 2000 was down -0.8%, the Global Dow Ex-US was down -1.1% and crude oil rose 3.1%.
China’s gross domestic product grew 7.6% from a year earlier in the second quarter, down from 8.1% annual growth in the first quarter. This is the country’s slowest pace of economic growth since the first quarter of 2009. China also reported this week that imports grew in June by just 6.3% from a year earlier while exports rose 11.3%, leading to a much greater trade surplus. The country’s consumer price index rose just 2.2% in June from a year earlier.
Economic growth in major economies is expected to slow in the coming months, according to the Organization for Economic Cooperation and Development’s leading indicators. Among developed economies, the eurozone was flagged as the main source of weakness, and the overall outlook was more downbeat for developing economies, including China, India, and Russia. The OECD predicted a pickup in activity in Brazil.
European industrial output rebounded unexpectedly in May, according to the European Union’s statistics office. Output rose 0.6% from April, but fell 2.8% from May 2011. Germany led the rebound, with its industrial production rising 1.5% in May. In a separate report, consumer price inflation in Germany fell in June to 1.7%, its lowest level since December 2010, according to Destatis, the country’s federal statistics office.
Moody’s Investors Service lowered Italy’s government bond rating two notches, noting that the country’s economy continues to weaken and faces fragile market confidence, a deteriorating overseas investor base, and heightened liquidity risk.
Spain announced new austerity measures as it tried to trim its budget deficit. The new measures include value-added tax hikes, lower unemployment benefits, and state employee wage cuts. The measures build on previous austerity actions, including an income tax increase and sharp budget cuts in all government ministries. Spain is already reeling economically, with 25% unemployment and an estimated economic contraction of 1.7% this year. Eurozone finance
ministers gave Spain a break, pushing back by one year a deadline to bring its budget deficit in line with the region’s standards and loosening the current year’s budget deficit target to 6.3% of GDP from the previous goal of 5.3%. Spain’s current deficit is 8.9% of GDP.
Brazil cut its benchmark interest rate to a record low, while South Korea’s central bank unexpectedly lowered its key interest rate for the first time in more than three years. South Korea also lowered its outlook for 2012 economic growth for the second time this year and is now expecting 3% annual growth. Brazil has been aggressively applying stimulus measures –– including rate cuts, tax cuts, and subsidized lending –– for a year, but continues to see disappointing results.
US economic reports were a mixed bag last week. Consumer credit expanded in May at the fastest pace in five months, according to a US Federal Reserve Board report. However, Friday morning’s preliminary consumer sentiment reading from Thomson Reuters/University of Michigan dipped to its lowest level since last December.
Weekly initial jobless claims fell by 26,000 to 350,000, the lowest level in four years, but analysts peg some of that drop to auto industry decisions not to close factories temporarily in order to retool in the first week of July, when they normally have.
US producer prices edged higher in June, rising by 0.1%, although they were expected to drop 0.5%.
US mortgage rates fell to record lows for the fourth straight week. The average rates for 30-year and 15-year fixed-rate mortgages were 3.56% and 2.86%, respectively.
JPMorgan Chase, the largest US bank by assets, reported an 8.7% decrease in second-quarter earnings and double-digit drop in revenue while reporting a $4.4 billion trading loss at its chief investment office. The bank also said it would restate its first-quarter results to reduce earnings and revenue after further investigation into the valuation of portfolio losses. Trading losses related to a failed hedging strategy now total $5.8 billion. The bank said the losses could grow by up to $1.7 billion more in a worst-case scenario.
Wells Fargo posted a 17% rise in second-quarter earnings as its mortgage banking income rose and its credit loss provision declined. The bank originated twice the volume of mortgages than it did in the year-earlier period. Revenue rose 4.4%, just shy of expectations. Wells Fargo, the country’s largest mortgage lender, will pay at least $175 million to settle claims that it discriminated against black and Hispanic borrowers. The case involves at least 34,000 minority borrowers who were charged higher fees or were sold risky subprime mortgages when they could have qualified for a prime mortgage with a lower fee. Rival Bank of America agreed to pay $335 million last November to settle a similar case.
Alcoa, the largest US aluminum producer, beat analysts’ estimates for second-quarter earnings and revenue on an increase in demand from the auto and aerospace industries. However, it posted a loss of $2 million after a net profit of $322 million a year ago. Alcoa has been hurt by a recent decline in aluminum prices as well as higher raw materials costs.
French car maker Peugeot said it will eliminate 8,000 jobs and close one of France’s largest car factories in 2014, the first such closure in France in more than a decade, in response to a significant slump in sales.
German software giant SAP notched a 7% increase from a year earlier in its second-quarter operating profit. Quarterly license sales rose 26%, the company announced in a pre-release of part of its second-quarter results.
Supermarket giant Supervalu, struggling with declining traffic at its 4,400 grocery stores (including Albertson’s and Shaw’s), is considering selling all or part of the company and will suspend its quarterly dividend. Supervalu’s earnings fell 45% in the most recent quarter.
The Week in Review for the week ending July 13, 2012
Continued disappointing global economic news led major stock indices downwards for the majority of last week. However, China’s weak second-quarter economic growth report led to speculation over upcoming government stimulus measures and equity markets rose strongly Friday.
Moody’s Investor Service downgraded Italy’s credit rating two notches in recognition of rising regional economic risks.
US economic data gave a more tempered look, with a mix of readings on the economy. Corporate earnings reports gave signs that the global slowdown could squeeze profits.
The euro continued its months-long slide as the eurozone debt crisis and regional recession wore on.
Amid this environment the DJIA was up 0.04%, the S&P 500 was up 0.2%, the Russell 2000 was down -0.8%, the Global Dow Ex-US was down -1.1% and crude oil rose 3.1%.
China’s gross domestic product grew 7.6% from a year earlier in the second quarter, down from 8.1% annual growth in the first quarter. This is the country’s slowest pace of economic growth since the first quarter of 2009. China also reported this week that imports grew in June by just 6.3% from a year earlier while exports rose 11.3%, leading to a much greater trade surplus. The country’s consumer price index rose just 2.2% in June from a year earlier.
Economic growth in major economies is expected to slow in the coming months, according to the Organization for Economic Cooperation and Development’s leading indicators. Among developed economies, the eurozone was flagged as the main source of weakness, and the overall outlook was more downbeat for developing economies, including China, India, and Russia. The OECD predicted a pickup in activity in Brazil.
European industrial output rebounded unexpectedly in May, according to the European Union’s statistics office. Output rose 0.6% from April, but fell 2.8% from May 2011. Germany led the rebound, with its industrial production rising 1.5% in May. In a separate report, consumer price inflation in Germany fell in June to 1.7%, its lowest level since December 2010, according to Destatis, the country’s federal statistics office.
Moody’s Investors Service lowered Italy’s government bond rating two notches, noting that the country’s economy continues to weaken and faces fragile market confidence, a deteriorating overseas investor base, and heightened liquidity risk.
Spain announced new austerity measures as it tried to trim its budget deficit. The new measures include value-added tax hikes, lower unemployment benefits, and state employee wage cuts. The measures build on previous austerity actions, including an income tax increase and sharp budget cuts in all government ministries. Spain is already reeling economically, with 25% unemployment and an estimated economic contraction of 1.7% this year. Eurozone finance
ministers gave Spain a break, pushing back by one year a deadline to bring its budget deficit in line with the region’s standards and loosening the current year’s budget deficit target to 6.3% of GDP from the previous goal of 5.3%. Spain’s current deficit is 8.9% of GDP.
Brazil cut its benchmark interest rate to a record low, while South Korea’s central bank unexpectedly lowered its key interest rate for the first time in more than three years. South Korea also lowered its outlook for 2012 economic growth for the second time this year and is now expecting 3% annual growth. Brazil has been aggressively applying stimulus measures –– including rate cuts, tax cuts, and subsidized lending –– for a year, but continues to see disappointing results.
US economic reports were a mixed bag last week. Consumer credit expanded in May at the fastest pace in five months, according to a US Federal Reserve Board report. However, Friday morning’s preliminary consumer sentiment reading from Thomson Reuters/University of Michigan dipped to its lowest level since last December.
Weekly initial jobless claims fell by 26,000 to 350,000, the lowest level in four years, but analysts peg some of that drop to auto industry decisions not to close factories temporarily in order to retool in the first week of July, when they normally have.
US producer prices edged higher in June, rising by 0.1%, although they were expected to drop 0.5%.
US mortgage rates fell to record lows for the fourth straight week. The average rates for 30-year and 15-year fixed-rate mortgages were 3.56% and 2.86%, respectively.
JPMorgan Chase, the largest US bank by assets, reported an 8.7% decrease in second-quarter earnings and double-digit drop in revenue while reporting a $4.4 billion trading loss at its chief investment office. The bank also said it would restate its first-quarter results to reduce earnings and revenue after further investigation into the valuation of portfolio losses. Trading losses related to a failed hedging strategy now total $5.8 billion. The bank said the losses could grow by up to $1.7 billion more in a worst-case scenario.
Wells Fargo posted a 17% rise in second-quarter earnings as its mortgage banking income rose and its credit loss provision declined. The bank originated twice the volume of mortgages than it did in the year-earlier period. Revenue rose 4.4%, just shy of expectations. Wells Fargo, the country’s largest mortgage lender, will pay at least $175 million to settle claims that it discriminated against black and Hispanic borrowers. The case involves at least 34,000 minority borrowers who were charged higher fees or were sold risky subprime mortgages when they could have qualified for a prime mortgage with a lower fee. Rival Bank of America agreed to pay $335 million last November to settle a similar case.
Alcoa, the largest US aluminum producer, beat analysts’ estimates for second-quarter earnings and revenue on an increase in demand from the auto and aerospace industries. However, it posted a loss of $2 million after a net profit of $322 million a year ago. Alcoa has been hurt by a recent decline in aluminum prices as well as higher raw materials costs.
French car maker Peugeot said it will eliminate 8,000 jobs and close one of France’s largest car factories in 2014, the first such closure in France in more than a decade, in response to a significant slump in sales.
German software giant SAP notched a 7% increase from a year earlier in its second-quarter operating profit. Quarterly license sales rose 26%, the company announced in a pre-release of part of its second-quarter results.
Supermarket giant Supervalu, struggling with declining traffic at its 4,400 grocery stores (including Albertson’s and Shaw’s), is considering selling all or part of the company and will suspend its quarterly dividend. Supervalu’s earnings fell 45% in the most recent quarter.
The Week in Review for the week ending July 13, 2012
Continued disappointing global economic news led major stock indices downwards for the majority of last week. However, China’s weak second-quarter economic growth report led to speculation over upcoming government stimulus measures and equity markets rose strongly Friday.
Moody’s Investor Service downgraded Italy’s credit rating two notches in recognition of rising regional economic risks.
US economic data gave a more tempered look, with a mix of readings on the economy. Corporate earnings reports gave signs that the global slowdown could squeeze profits.
The euro continued its months-long slide as the eurozone debt crisis and regional recession wore on.
Amid this environment the DJIA was up 0.04%, the S&P 500 was up 0.2%, the Russell 2000 was down -0.8%, the Global Dow Ex-US was down -1.1% and crude oil rose 3.1%.
China’s gross domestic product grew 7.6% from a year earlier in the second quarter, down from 8.1% annual growth in the first quarter. This is the country’s slowest pace of economic growth since the first quarter of 2009. China also reported this week that imports grew in June by just 6.3% from a year earlier while exports rose 11.3%, leading to a much greater trade surplus. The country’s consumer price index rose just 2.2% in June from a year earlier.
Economic growth in major economies is expected to slow in the coming months, according to the Organization for Economic Cooperation and Development’s leading indicators. Among developed economies, the eurozone was flagged as the main source of weakness, and the overall outlook was more downbeat for developing economies, including China, India, and Russia. The OECD predicted a pickup in activity in Brazil.
European industrial output rebounded unexpectedly in May, according to the European Union’s statistics office. Output rose 0.6% from April, but fell 2.8% from May 2011. Germany led the rebound, with its industrial production rising 1.5% in May. In a separate report, consumer price inflation in Germany fell in June to 1.7%, its lowest level since December 2010, according to Destatis, the country’s federal statistics office.
Moody’s Investors Service lowered Italy’s government bond rating two notches, noting that the country’s economy continues to weaken and faces fragile market confidence, a deteriorating overseas investor base, and heightened liquidity risk.
Spain announced new austerity measures as it tried to trim its budget deficit. The new measures include value-added tax hikes, lower unemployment benefits, and state employee wage cuts. The measures build on previous austerity actions, including an income tax increase and sharp budget cuts in all government ministries. Spain is already reeling economically, with 25% unemployment and an estimated economic contraction of 1.7% this year. Eurozone finance
ministers gave Spain a break, pushing back by one year a deadline to bring its budget deficit in line with the region’s standards and loosening the current year’s budget deficit target to 6.3% of GDP from the previous goal of 5.3%. Spain’s current deficit is 8.9% of GDP.
Brazil cut its benchmark interest rate to a record low, while South Korea’s central bank unexpectedly lowered its key interest rate for the first time in more than three years. South Korea also lowered its outlook for 2012 economic growth for the second time this year and is now expecting 3% annual growth. Brazil has been aggressively applying stimulus measures –– including rate cuts, tax cuts, and subsidized lending –– for a year, but continues to see disappointing results.
US economic reports were a mixed bag last week. Consumer credit expanded in May at the fastest pace in five months, according to a US Federal Reserve Board report. However, Friday morning’s preliminary consumer sentiment reading from Thomson Reuters/University of Michigan dipped to its lowest level since last December.
Weekly initial jobless claims fell by 26,000 to 350,000, the lowest level in four years, but analysts peg some of that drop to auto industry decisions not to close factories temporarily in order to retool in the first week of July, when they normally have.
US producer prices edged higher in June, rising by 0.1%, although they were expected to drop 0.5%.
US mortgage rates fell to record lows for the fourth straight week. The average rates for 30-year and 15-year fixed-rate mortgages were 3.56% and 2.86%, respectively.
JPMorgan Chase, the largest US bank by assets, reported an 8.7% decrease in second-quarter earnings and double-digit drop in revenue while reporting a $4.4 billion trading loss at its chief investment office. The bank also said it would restate its first-quarter results to reduce earnings and revenue after further investigation into the valuation of portfolio losses. Trading losses related to a failed hedging strategy now total $5.8 billion. The bank said the losses could grow by up to $1.7 billion more in a worst-case scenario.
Wells Fargo posted a 17% rise in second-quarter earnings as its mortgage banking income rose and its credit loss provision declined. The bank originated twice the volume of mortgages than it did in the year-earlier period. Revenue rose 4.4%, just shy of expectations. Wells Fargo, the country’s largest mortgage lender, will pay at least $175 million to settle claims that it discriminated against black and Hispanic borrowers. The case involves at least 34,000 minority borrowers who were charged higher fees or were sold risky subprime mortgages when they could have qualified for a prime mortgage with a lower fee. Rival Bank of America agreed to pay $335 million last November to settle a similar case.
Alcoa, the largest US aluminum producer, beat analysts’ estimates for second-quarter earnings and revenue on an increase in demand from the auto and aerospace industries. However, it posted a loss of $2 million after a net profit of $322 million a year ago. Alcoa has been hurt by a recent decline in aluminum prices as well as higher raw materials costs.
French car maker Peugeot said it will eliminate 8,000 jobs and close one of France’s largest car factories in 2014, the first such closure in France in more than a decade, in response to a significant slump in sales.
German software giant SAP notched a 7% increase from a year earlier in its second-quarter operating profit. Quarterly license sales rose 26%, the company announced in a pre-release of part of its second-quarter results.
Supermarket giant Supervalu, struggling with declining traffic at its 4,400 grocery stores (including Albertson’s and Shaw’s), is considering selling all or part of the company and will suspend its quarterly dividend. Supervalu’s earnings fell 45% in the most recent quarter.
The Week in Review for the week ending July 13, 2012
Continued disappointing global economic news led major stock indices downwards for the majority of last week. However, China’s weak second-quarter economic growth report led to speculation over upcoming government stimulus measures and equity markets rose strongly Friday.
Moody’s Investor Service downgraded Italy’s credit rating two notches in recognition of rising regional economic risks.
US economic data gave a more tempered look, with a mix of readings on the economy. Corporate earnings reports gave signs that the global slowdown could squeeze profits.
The euro continued its months-long slide as the eurozone debt crisis and regional recession wore on.
Amid this environment the DJIA was up 0.04%, the S&P 500 was up 0.2%, the Russell 2000 was down -0.8%, the Global Dow Ex-US was down -1.1% and crude oil rose 3.1%.
China’s gross domestic product grew 7.6% from a year earlier in the second quarter, down from 8.1% annual growth in the first quarter. This is the country’s slowest pace of economic growth since the first quarter of 2009. China also reported this week that imports grew in June by just 6.3% from a year earlier while exports rose 11.3%, leading to a much greater trade surplus. The country’s consumer price index rose just 2.2% in June from a year earlier.
Economic growth in major economies is expected to slow in the coming months, according to the Organization for Economic Cooperation and Development’s leading indicators. Among developed economies, the eurozone was flagged as the main source of weakness, and the overall outlook was more downbeat for developing economies, including China, India, and Russia. The OECD predicted a pickup in activity in Brazil.
European industrial output rebounded unexpectedly in May, according to the European Union’s statistics office. Output rose 0.6% from April, but fell 2.8% from May 2011. Germany led the rebound, with its industrial production rising 1.5% in May. In a separate report, consumer price inflation in Germany fell in June to 1.7%, its lowest level since December 2010, according to Destatis, the country’s federal statistics office.
Moody’s Investors Service lowered Italy’s government bond rating two notches, noting that the country’s economy continues to weaken and faces fragile market confidence, a deteriorating overseas investor base, and heightened liquidity risk.
Spain announced new austerity measures as it tried to trim its budget deficit. The new measures include value-added tax hikes, lower unemployment benefits, and state employee wage cuts. The measures build on previous austerity actions, including an income tax increase and sharp budget cuts in all government ministries. Spain is already reeling economically, with 25% unemployment and an estimated economic contraction of 1.7% this year. Eurozone finance
ministers gave Spain a break, pushing back by one year a deadline to bring its budget deficit in line with the region’s standards and loosening the current year’s budget deficit target to 6.3% of GDP from the previous goal of 5.3%. Spain’s current deficit is 8.9% of GDP.
Brazil cut its benchmark interest rate to a record low, while South Korea’s central bank unexpectedly lowered its key interest rate for the first time in more than three years. South Korea also lowered its outlook for 2012 economic growth for the second time this year and is now expecting 3% annual growth. Brazil has been aggressively applying stimulus measures –– including rate cuts, tax cuts, and subsidized lending –– for a year, but continues to see disappointing results.
US economic reports were a mixed bag last week. Consumer credit expanded in May at the fastest pace in five months, according to a US Federal Reserve Board report. However, Friday morning’s preliminary consumer sentiment reading from Thomson Reuters/University of Michigan dipped to its lowest level since last December.
Weekly initial jobless claims fell by 26,000 to 350,000, the lowest level in four years, but analysts peg some of that drop to auto industry decisions not to close factories temporarily in order to retool in the first week of July, when they normally have.
US producer prices edged higher in June, rising by 0.1%, although they were expected to drop 0.5%.
US mortgage rates fell to record lows for the fourth straight week. The average rates for 30-year and 15-year fixed-rate mortgages were 3.56% and 2.86%, respectively.
JPMorgan Chase, the largest US bank by assets, reported an 8.7% decrease in second-quarter earnings and double-digit drop in revenue while reporting a $4.4 billion trading loss at its chief investment office. The bank also said it would restate its first-quarter results to reduce earnings and revenue after further investigation into the valuation of portfolio losses. Trading losses related to a failed hedging strategy now total $5.8 billion. The bank said the losses could grow by up to $1.7 billion more in a worst-case scenario.
Wells Fargo posted a 17% rise in second-quarter earnings as its mortgage banking income rose and its credit loss provision declined. The bank originated twice the volume of mortgages than it did in the year-earlier period. Revenue rose 4.4%, just shy of expectations. Wells Fargo, the country’s largest mortgage lender, will pay at least $175 million to settle claims that it discriminated against black and Hispanic borrowers. The case involves at least 34,000 minority borrowers who were charged higher fees or were sold risky subprime mortgages when they could have qualified for a prime mortgage with a lower fee. Rival Bank of America agreed to pay $335 million last November to settle a similar case.
Alcoa, the largest US aluminum producer, beat analysts’ estimates for second-quarter earnings and revenue on an increase in demand from the auto and aerospace industries. However, it posted a loss of $2 million after a net profit of $322 million a year ago. Alcoa has been hurt by a recent decline in aluminum prices as well as higher raw materials costs.
French car maker Peugeot said it will eliminate 8,000 jobs and close one of France’s largest car factories in 2014, the first such closure in France in more than a decade, in response to a significant slump in sales.
German software giant SAP notched a 7% increase from a year earlier in its second-quarter operating profit. Quarterly license sales rose 26%, the company announced in a pre-release of part of its second-quarter results.
Supermarket giant Supervalu, struggling with declining traffic at its 4,400 grocery stores (including Albertson’s and Shaw’s), is considering selling all or part of the company and will suspend its quarterly dividend. Supervalu’s earnings fell 45% in the most recent quarter.
The Week in Review for the week ending July 13, 2012
Continued disappointing global economic news led major stock indices downwards for the majority of last week. However, China’s weak second-quarter economic growth report led to speculation over upcoming government stimulus measures and equity markets rose strongly Friday.
Moody’s Investor Service downgraded Italy’s credit rating two notches in recognition of rising regional economic risks.
US economic data gave a more tempered look, with a mix of readings on the economy. Corporate earnings reports gave signs that the global slowdown could squeeze profits.
The euro continued its months-long slide as the eurozone debt crisis and regional recession wore on.
Amid this environment the DJIA was up 0.04%, the S&P 500 was up 0.2%, the Russell 2000 was down -0.8%, the Global Dow Ex-US was down -1.1% and crude oil rose 3.1%.
China’s gross domestic product grew 7.6% from a year earlier in the second quarter, down from 8.1% annual growth in the first quarter. This is the country’s slowest pace of economic growth since the first quarter of 2009. China also reported this week that imports grew in June by just 6.3% from a year earlier while exports rose 11.3%, leading to a much greater trade surplus. The country’s consumer price index rose just 2.2% in June from a year earlier.
Economic growth in major economies is expected to slow in the coming months, according to the Organization for Economic Cooperation and Development’s leading indicators. Among developed economies, the eurozone was flagged as the main source of weakness, and the overall outlook was more downbeat for developing economies, including China, India, and Russia. The OECD predicted a pickup in activity in Brazil.
European industrial output rebounded unexpectedly in May, according to the European Union’s statistics office. Output rose 0.6% from April, but fell 2.8% from May 2011. Germany led the rebound, with its industrial production rising 1.5% in May. In a separate report, consumer price inflation in Germany fell in June to 1.7%, its lowest level since December 2010, according to Destatis, the country’s federal statistics office.
Moody’s Investors Service lowered Italy’s government bond rating two notches, noting that the country’s economy continues to weaken and faces fragile market confidence, a deteriorating overseas investor base, and heightened liquidity risk.
Spain announced new austerity measures as it tried to trim its budget deficit. The new measures include value-added tax hikes, lower unemployment benefits, and state employee wage cuts. The measures build on previous austerity actions, including an income tax increase and sharp budget cuts in all government ministries. Spain is already reeling economically, with 25% unemployment and an estimated economic contraction of 1.7% this year. Eurozone finance
ministers gave Spain a break, pushing back by one year a deadline to bring its budget deficit in line with the region’s standards and loosening the current year’s budget deficit target to 6.3% of GDP from the previous goal of 5.3%. Spain’s current deficit is 8.9% of GDP.
Brazil cut its benchmark interest rate to a record low, while South Korea’s central bank unexpectedly lowered its key interest rate for the first time in more than three years. South Korea also lowered its outlook for 2012 economic growth for the second time this year and is now expecting 3% annual growth. Brazil has been aggressively applying stimulus measures –– including rate cuts, tax cuts, and subsidized lending –– for a year, but continues to see disappointing results.
US economic reports were a mixed bag last week. Consumer credit expanded in May at the fastest pace in five months, according to a US Federal Reserve Board report. However, Friday morning’s preliminary consumer sentiment reading from Thomson Reuters/University of Michigan dipped to its lowest level since last December.
Weekly initial jobless claims fell by 26,000 to 350,000, the lowest level in four years, but analysts peg some of that drop to auto industry decisions not to close factories temporarily in order to retool in the first week of July, when they normally have.
US producer prices edged higher in June, rising by 0.1%, although they were expected to drop 0.5%.
US mortgage rates fell to record lows for the fourth straight week. The average rates for 30-year and 15-year fixed-rate mortgages were 3.56% and 2.86%, respectively.
JPMorgan Chase, the largest US bank by assets, reported an 8.7% decrease in second-quarter earnings and double-digit drop in revenue while reporting a $4.4 billion trading loss at its chief investment office. The bank also said it would restate its first-quarter results to reduce earnings and revenue after further investigation into the valuation of portfolio losses. Trading losses related to a failed hedging strategy now total $5.8 billion. The bank said the losses could grow by up to $1.7 billion more in a worst-case scenario.
Wells Fargo posted a 17% rise in second-quarter earnings as its mortgage banking income rose and its credit loss provision declined. The bank originated twice the volume of mortgages than it did in the year-earlier period. Revenue rose 4.4%, just shy of expectations. Wells Fargo, the country’s largest mortgage lender, will pay at least $175 million to settle claims that it discriminated against black and Hispanic borrowers. The case involves at least 34,000 minority borrowers who were charged higher fees or were sold risky subprime mortgages when they could have qualified for a prime mortgage with a lower fee. Rival Bank of America agreed to pay $335 million last November to settle a similar case.
Alcoa, the largest US aluminum producer, beat analysts’ estimates for second-quarter earnings and revenue on an increase in demand from the auto and aerospace industries. However, it posted a loss of $2 million after a net profit of $322 million a year ago. Alcoa has been hurt by a recent decline in aluminum prices as well as higher raw materials costs.
French car maker Peugeot said it will eliminate 8,000 jobs and close one of France’s largest car factories in 2014, the first such closure in France in more than a decade, in response to a significant slump in sales.
German software giant SAP notched a 7% increase from a year earlier in its second-quarter operating profit. Quarterly license sales rose 26%, the company announced in a pre-release of part of its second-quarter results.
Supermarket giant Supervalu, struggling with declining traffic at its 4,400 grocery stores (including Albertson’s and Shaw’s), is considering selling all or part of the company and will suspend its quarterly dividend. Supervalu’s earnings fell 45% in the most recent quarter.