Greek Debt Revised Higher; Dollar Gains

123jump.com Staff
22 Apr, 2010
New York City

The U.S. dollar traded higher after the European Union statistics office revised Greek budget deficit estimate higher. The surprised deficit revision dragged the euro lower and raised questions the union

[R]9:30 AM New York – The U.S. dollar traded higher after the European Union statistics office revised Greek budget deficit estimate higher. The surprised deficit revision dragged the euro lower and raised questions the union’s ability to monitor member nations. eBay revenues up 9% and SanDisk sales surge 65%.[/R]

The trading in stocks in early morning was dominated by the unfolding events in Europe.

The dollar gained against the euro after the eurostat, the European statistics office revised the estimate of Greek budget deficit higher to 13.6% of GDP compared to 12.9% estimated by the government only two weeks ago.

The surprise debt revision put investors on the defensive and dragged the euro and the Greek bonds sharply lower. The yield of 10-year bonds rose to a record 8.49% as the eurostat said that the deficit may be revised further higher by 0.5 percentage point.

The larger than estimated Greek deficit put the European Union officials on the defensive too as it now raises more questions about the union’s ability to monitor member nations and enforce strict rules in data gathering.

U.S. stocks traded cautiously higher after better-than-estimated earnings from SanDisk and eBay.

eBay Inc., the online auction site operator said first quarter revenues rose 9% to $2.20 billion from $2.02 billion a year ago. Net income in the quarter rose 11.3% to $397.7 million or 30 cents per diluted share compared to net income of $357.1 million or 28 cents per share a year ago.

SanDisk Corporation, the flash memory card maker said first quarter revenue rose 65% to $1.09 billion from $659.5 million a year ago. Net income in the quarter was $234.7 million or 99 cents per diluted share compared to net loss of $208 million or 92 cents per share a year ago

U.S. Financial Reform

President Barack Obama urged lawmakers to overhaul the U.S. financial system keeping the consumer in focus. The legislation seeks stringent measures to avoid future financial crisis and safeguard the interests of investors in mortgages, credit cards or loans.

Addressing reporters President Obama said, “We don’t have to bail out firms if they acted recklessly, that we can unwind them in an orderly fashion that protects the economy as a whole and taxpayers aren’t on the hook.”

International Monetary Fund Outlook Increases

The International Monetary Fund lifted its estimate of global economic growth to 4.2% in 2010 compared with its previous estimate of 3.9% in January. The IMF also said that surging public debt will have severe repercussions on the world economy.

According to the IMF, U.S. gross domestic product will increase 3.1% and the growth will declined to 2.6% in 2011.

European Market Indexes Decline

The European budget deficit has widened due to Greece’s deepening government debt crisis. The Greek government is under tremendous pressure to accept the European bailout package as stocks fell and the euro dropped notwithstanding a strike by the country’s civil servants.

Investors are increasingly worried that rising interest rates will make it difficult for the nation to trim its budget deficit from 12.7% to below 9% in the current year and meet the EU guideline of 3% deficit by 2014.

Greece’s ASE Index declined 2.7%.

Commodities, Currencies and Yields

Dollar edged higher against euro to $1.3348 and decreased against the Japanese yen to 92.94.

Crude oil decreased $0.98 to $82.70 a barrel for a front month contract, natural gas edged higher $0.01 cent to $3.96 per mBtu and gasoline decreased 5.900 cents to 225.81 cents.

Gold increased $6.60 in New York trading to close at $1,142.20 per ounce, silver closed lower $0.138 to $17.94 per ounce and copper for the front month delivery decreased 2.750 cents to $3.50 per pound.

Yields on 10-year U.S. bonds increased to 3.73% and on 30-year U.S. bonds traded at 4.61%.

Stock Movers

Delcath Systems, Inc. surged 30.7% after the development-stage company reported that its Phase III multi-center clinical trial has successfully met the study’s primary endpoint of extended hepatic progression-free survival (hPFS) in patients with melanoma metastases to the liver based on an independently corroborated intent-to-treat analysis.

Questar Corporation increased 6.3% on plans for a spin-off of its exploration and production business.

Qualcomm Inc. declined 7.8% after the company reported lower than expected sales and profit estimates.

Starbucks Corporation rose 1.6% after the coffee-shop chain operator said second quarter comparable store sales increased 7%.

Earnings Review

E*TRADE Financial Corporation ((ETFC)), the financial services company said first quarter revenue rose 8% to $536.5 million from $497.3 million a year ago. Net loss in the quarter was $47.8 million or 2 cents per diluted share compared to net loss of $232.7 million or 41 cents per share a year ago.

eBay Inc. ((EBAY)), the online auction site operator said first quarter revenue rose 9% to $2.20 billion from $2.02 billion a year ago. Net income in the quarter rose 11.3% to $397.7 million or 30 cents per diluted share compared to net income of $357.1 million or 28 cents per share a year ago.

Novellus Systems, Inc. ((NVLS)), the provider of equipment for the semiconductor industry said first quarter sales rose 179.4% to $276.3 million from $98.9 million a year ago. Net income in the quarter was $41.3 million or 43 cents per diluted share compared to net loss of $66.4 million or 69 cents per share a year ago.

Qualcomm Incorporated ((QCOM)), the mobile phone chip and software maker said second quarter sales rose 8% to $2.66 billion from $2.46 billion a year ago. Net income in the quarter was $774 million or 46 cents per diluted share compared to net loss of $289 million or 18 cents per share a year ago.

Asian Markets Review

The Nikkei 225 Index in Tokyo closed lower 140.96 or 1.27% to 10,949.09, Hang Seng index in Hong Kong decreased 55.99 or 0.26% to 21,454.94 and CSI 300 index in China lower 35.14 or 1.09% to 3,201.54. ASX 200 index in Australia decreased 46.90 or 0.95% to 4,907.40. The FTSE Bursa KL Composite index in Malaysia closed higher 3.37 or 0.25% to 1,337.01.

The Kospi Index in South Korea decreased 8.06 or 0.46% to close at 1,739.52. SET index in Thailand closed higher 3.33 or 0.44% to 761.18 and JSE Index in Indonesia increased 13.71 or 0.47% to 2,926.53. The Sensex index in India increased 101.43 or 0.58% to 17,573.99.

Europe Markets Review

In London FTSE 100 Index traded lower 41.43 or 0.72% to 5,682.00, in Paris CAC 40 Index decreased 36.30 or 0.91% to 3,941.37 and in Frankfurt DAX index traded lower 48.72 or 0.78% to 6,181.66. In Zurich trading SMI decreased 50.68 or 0.74% to 6,764.03.