Crucial G7 Meet Today, Payrolls In U.S. Surge

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

U.S. stocks advance as U.S. non-farm payroll employment rises and unemployment rate edges higher to 9.9%. Crucial G7 meet today to discuss Greece debt crisis. Conservative David Cameron wins UK election but fails to get majority. Kraft Foods profit soars. AIG net swings to $1.5 billion.

[R]11:00 AM New York – U.S. stocks advance as U.S. non-farm payroll employment rises and unemployment rate edges higher to 9.9%. Crucial G7 meet today to discuss Greece debt crisis. Conservative David Cameron wins UK election but fails to get majority. Kraft Foods profit soars. AIG net swings to $1.5 billion.[/R]

World stocks fall 4% as contagion fears persist. U.S. stock futures trade higher amidst renewed optimism among investors after the government said the nation added 290,000 jobs last month. U.S. stocks rebounded after a glitch in trading leading to an almost 1,000-point intra-day drop in the previous session and on increasing fears about the contagion effect of debt crisis in Greece across other countries in Europe abating.

The dollar advanced further against the euro, the franc and the yen, but declined against the pound.

The Group of Seven plans to hold a conference call today to discuss the Greek debt crisis, according to Japanese Finance Minister Naoto Kan. European members “will probably explain” steps taken with the International Monetary Fund to assist Greece, Kan said at a press conference in Tokyo today. “I don’t think we will be asked to take specific action, such as currency intervention.”

The Bank of Japan has announced that it will pump 2 trillion yen into the financial system after the Greek debt crisis caused instability in financial markets in the U.S. and Europe. The emergency measure represents the bank's first same-day repurchase operations since December. The balance of current-account deposits held by financial institutions at the central bank will likely increase to 16.9 trillion yen, up 800 billion yen from yesterday, the central bank said.

Greece took a step closer to receiving rescue funds after its parliament approved a €30 billion austerity bill late on Thursday and the French Senate approved France's contribution to the European Union aid package. Germany's Bundestag, the lower house of parliament, is due to vote on a draft law on the German contribution to the aid package.

However, the European Central Bank Governing Council did not discuss buying government bonds at its most recent policy meeting and retained its key interest rate at a record low of 1% yesterday.

According to economists, employment in the U.S. probably grew in April for the third time in four months, a sign the recovery is becoming self-sustaining.

April non-farm payroll employment rose by 290,000 and the unemployment rate edged up to 9.9%. The temporary hiring picked as U.S. hired staff for Census 2010. Long term unemployment increased to 6.7 million, 45.9% of unemployed.

Most top retail chains reported weaker-than-expected April same-store sales on Thursday. Sales at stores open at least a year rose 0.5% in April, same-store sales rose 4.8% in the March-April period.

Britain's opposition Conservatives led by David Cameron gained the most seats in U.K. elections, while failing to win a majority in the 650-seat House of Commons, creating the first ""hung parliament"" since 1974.

With results in 620 constituencies declared, the Conservatives were on 291 seats, followed by Labor on 251 and the centrist Liberal Democrats on 51.

Liberal Democrat Leader Nick Clegg said, “It seems this morning that it is the Conservative party that has more votes and more seats, though not an absolute majority, and that is why I think it is now for the Conservative party to prove that it is capable of seeking to govern in the national interest.”

Prices regained some ground after Clegg suggested that the Conservatives held the initiative and the ratings agency Moody's said the ambiguous election result did not pose a direct threat to Britain's triple-A sovereign debt rating.

The pound dropped 1.1% to $1.4672, a 13-month low. Gilt futures declined 1.1% as a result of the outcome of the election.

Kraft Foods Inc., the food company, said that its first quarter profit rose sharply from last year, helped by gains from sale of its frozen pizza business and the acquisition of British confectioner Cadbury.

AIG, the insurer bailed out by the federal government reported net income surged for the first quarter as its struggling insurance business showed signs of improvement. The company also said Friday that recovering credit markets and ongoing efforts to streamline its operations contributed to improved performance.

Commodities, Currencies and Yields

Dollar edged lower against euro to $1.2774 and increased against the Japanese yen to 92.49.

Crude oil increased $0.60 to $77.71 a barrel for a front month contract, natural gas edged higher $0.04 cent to $3.96 per mBtu and gasoline increased 2.320 cents to 217.95 cents.

Gold increased $4.50 in New York trading to close at $1,201.80 per ounce, silver closed higher $0.195 to $17.71 per ounce and copper for the front month delivery increased 0.950 cents to $3.12 per pound.

Yields on 10-year U.S. bonds increased to 3.47% and on 30-year U.S. bonds traded at 4.29%.

Stock Movers

Hansen Natural Corporation plunged 15.8% after the beverage maker reported first quarter net sales decreased 2.5% to $238.1 million from $244.2 million a year ago.

Harmonic Inc., the provider of video-delivery systems decreased 7.4%.

Rosetta Stone Inc. fell 3.1%. The provider of education software said first quarter total revenue increased 25% to $63.0 million compared to $50.3 million a year ago.

STEC, Inc., the maker of flash-memory drives rose 0.3%.

Earnings Review

American International Group, Inc. ((AIG)), the insurance company reported first quarter net premiums written fell 1% to $7.64 billion from $7.73 billion a year ago. Net income in the quarter was $1.45 billion or $2.16 per diluted share compared to net loss of $4.35 billion or $39.67 per share a year ago.

bebe stores, inc. ((BEBE)), the clothing company said third quarter sales fell 10% to $114.5 million from $127.7 million a year ago. Net loss in the quarter was $5.5 million or 6 cents per diluted share compared to net loss of $5.0 million or 6 cents per share a year ago.

General Cable Corporation ((BGC),) the maker of copper, aluminum and fiber optic wire and cable products said first quarter sales rose 5.7% to $1.1 billion from $1.04 billion a year ago. Net loss in the quarter was $7.8 million or 15 cents per diluted share compared to net loss of $27.2 million or 52 cents per share a year ago.

Kraft Foods Inc. ((KFT)), the food maker said first quarter revenues rose 25.6% to $11.3 billion from $9.0 billion a year ago. Net income in the quarter rose 185% to $1.88 billion or $1.16 per diluted share compared to net income of $660 million or 45 cents per share a year ago.

Asian Markets Review

The Nikkei 225 Index in Tokyo closed lower 331.10 or 3.10% to 10,364.59, Hang Seng index in Hong Kong decreased 213.12 or 1.06% to 19,920.29 and CSI 300 index in China lower 60.07 or 2.07% to 2,836.79. ASX 200 index in Australia decreased 92.50 or 2.02% to 4,480.70. The FTSE Bursa KL Composite index in Malaysia closed higher 1.02 or 0.08% to 1,332.89.

The Kospi Index in South Korea decreased 37.21 or 2.21% to close at 1,647.50. SET index in Thailand closed lower 16.70 or 2.13% to 768.55 and JSE Index in Indonesia decreased 71.28 or 2.54% to 2,739.33. The Sensex index in India decreased 218.42 or 1.29% to 16,769.11.

Europe Markets Review

In London FTSE 100 Index closed lower 0.83 or 0.02% to 5,260.16, in Paris CAC 40 Index decreased 26.16 or 0.74% to close at 3,529.95, in Frankfurt DAX index lower 30.58 or 0.52% to close at 5,877.68. In Zurich trading SMI decreased 25.11 or 0.39% to close at 6,362.41.