Interest Rates Unchanged, Euro Falls

Arthi Gupta, Mayank Mehta and Sanjay Barot
06 May, 2010
New York City

The euro and world shares fell amidst worries that the sovereign debt crisis may spread to other eurozone countries. U.S. productivity rises in first quarter at 3.6% and weekly jobless claims decrease 7,000. Britain goes to the polls today. Cigna first quarter profit rises.

[R]11:00 AM New York – The euro and world shares tumble amidst worries that the sovereign debt crisis may spread to other eurozone regions. U.S. productivity rises in first quarter at 3.6% and weekly jobless claims decrease 7,000. Britain goes to the polls today. Cigna first quarter profit rises.[/R]

U.S. stocks declined on the European Central Bank’s decision to leave interest rate unchanged at 1%. World markets plunged for the third day in succession on increasing concerns about the debt concerns in Greece and contagion effect of the same in other countries in the region. Large scale protests by people in Greece against austerity measures resulting in three deaths due to violence, speculation that Portugal might also face downgrades and sharp decline in commodity prices dragged the markets sharply lower.

German Finance Minister Wolfgang Schaeuble said any restructuring of Greek debt would cause ""exactly the kind of conflagration that we could no longer control.""

The Greek parliament prepared to adopt a harsh austerity plan on Thursday in the face of violent unrest, as markets looked to the European Central Bank to prevent a debt crisis engulfing the euro zone.

Greece’s Parliament began debating austerity measures demanded by the European Union and International Monetary Fund as a condition of a €110 billion or $140 billion bailout. It is designed to save an extra €30 billion to reduce a deficit that stood at 13.6% of economic output in 2009.

The country''s main public sector union ADEDY and private sector union GSEE planned to demonstrate outside parliament ahead of the expected vote late on Thursday on the bill.

The euro tumbled to a fourteen-month low against the dollar. The euro fell as low as $1.2717, its weakest since March 2009.

Seasonally adjusted weekly jobless claims in the U.S. decreased 7,000 to 444,000 from the revised previous week claims of 451,000. The preliminary insured unemployment rate in the week ending April 24 was unchanged from the prior week''s unrevised rate of 3.6%.

Non-farm business sector labor productivity increased at a 3.6% annual rate during the first quarter of 2010. Compared to first quarter of 2009, productivity rose 4.4%. Labor costs drops 5.9% and unit labor cost fell to 1.6% in the last four quarters.

The United Kingdom general election of 2010 is being held today, May 6. David Cameron, the Tory leader, Labor leader Gordon Brown, and Nick Clegg, leader of the Liberal Democrats are in the fray. This election is being viewed as Britain’s closest election race for decades.

Healthcare benefits provider Cigna reported a higher profit in its first quarter, reflecting strong earnings contributions from ongoing operations as well as higher revenues.

Commodities, Currencies and Yields

Dollar edged higher against euro to $1.2758 and increased against the Japanese yen to 93.84.

Crude oil increased $0.02 to $79.99 a barrel for a front month contract, natural gas edged lower $0.02 cent to $3.97 per mBtu and gasoline decreased 0.580 cents to 221.46 cents.

Gold increased $8.20 in New York trading to close at $1,183.20 per ounce, silver closed higher $0.126 to $17.66 per ounce and copper for the front month delivery increased 1.350 cents to $3.16 per pound.

Yields on 10-year U.S. bonds increased to 3.57% and on 30-year U.S. bonds traded at 4.42%.

Stock Movers

Cogent, Inc. rose 0.8%. The maker of fingerprint- identification systems posted first quarter net income of $5.7 million or 6 cents per diluted share.

HealthTronics, Inc., the provider of healthcare services rose 1.9%.

Medifast, Inc. gained 8.9% after the provider of weight loss programs said first quarter profit nearly doubled on sales jump.

Pacer International, Inc. rose 0.1% after the provider of trucking, freight and transportation logistics services reported its first quarter net loss narrowed to $500,000 or a penny a share from $177.4 million or $5.11 a share a year ago.

Titanium Metals Corporation added 1.8% after the supplier of the lightweight metal said net sales were $217.5 million for the first quarter of 2010 compared to net sales of $203.4 million for the first quarter of 2009.

Earnings Review

Cigna Corporation ((CI)), the health insurer reported first quarter sales rose 9% to $5.21 billion from $4.77 billion a year ago. Net income in the quarter rose 36% to $283 million or $1.02 per diluted share compared to net income of $208 million or 76 cents per share a year ago.

CBS Corporation ((CBS)), the broadcasting company said first quarter sales rose 12% to $3.53 billion from $3.16 billion a year ago. Net loss in the quarter was $26.2 million or 4 cents per diluted share compared to net loss of $55.3 million or 8 cents per share a year ago.

Murphy Oil Corporation ((MUR)), the oil company said first quarter revenues rose 50% to $5.18 billion from $3.45 billion a year ago. Net income in the quarter fell 13% to $148.9 million or 77 cents per diluted share compared to net income of $171.1 million or 89 cents per share a year ago.

Symantec Corporation ((SYMC)), the maker of the Norton antivirus software said fourth quarter revenues rose 4% to $1.53 billion from $1.47 billion a year ago. Net income in the quarter was $184 million or 23 cents per diluted share compared to net loss of $264 million or 32 cents per share a year ago.

Asian Markets Review

The Nikkei 225 Index in Tokyo closed lower 361.71 or 3.27% to 10,695.69, Hang Seng index in Hong Kong decreased 194.13 or 0.96% to 20,133.41 and CSI 300 index in China lower 139.54 or 4.60% to 2,896.86. ASX 200 index in Australia decreased 100.80 or 2.16% to 4,573.20. The FTSE Bursa KL Composite index in Malaysia closed lower 3.78 or 0.28% to 1,331.87.

The Kospi Index in South Korea decreased 34.04 or 1.98% to close at 1,684.71. SET index in Thailand closed lower 11.61 or 1.46% to 785.25 and JSE Index in Indonesia decreased 35.62 or 1.25% to 2,810.62. The Sensex index in India decreased 100.43 or 0.59% to 16,987.53.

Europe Markets Review

In London FTSE 100 Index closed higher 12.66 or 0.24% to 5,354.59, in Paris CAC 40 Index increased 21.06 or 0.58% to close at 3,657.09, in Frankfurt DAX index higher 28.94 or 0.49% to close at 5,987.39. In Zurich trading SMI increased 16.51 or 0.26% to close at 6,465.00.