U.S. Inflation Index Falls, Jobless Claims Rise

Arthi Gupta, Mayank Mehta and Sanjay Barot
17 Jun, 2010
New York City

U.S. stocks trade sideways after inflation index declined 0.2% in May and weekly jobless claims increased 12,000. BP Plc agrees to set up a $20 billion compensation fund for liabilities attributed to the Gulf oil spill. BP may face additional expenses to fix the leak and may face criminal penalties.

[R]9:55 AM New York – U.S. stocks trade sideways after inflation index declined 0.2% in May and weekly jobless claims increased 12,000. BP Plc agrees to set up a $20 billion compensation fund for liabilities attributed to the Gulf oil spill. BP may face additional expenses to fix the leak and may face criminal penalties.[/R]

Mixed trends were seen across the Asian markets while European markets rose after Spain successfully raised €3.5 billion through the sale of 10-year and 30-year bonds today.

The U.S. Labor Department reported that consumer prices dropped 0.2% in May following a 0.1% decline in April. Core prices, which exclude the volatile food and energy sectors, edged up 0.1%.

Initial jobless claims rose 12,000 to 472,000 for the week ended June 12, according to data released by the U.S. Department of Labor. The number of people receiving unemployment claims rose to 4.57 million.

BP Plc Chairman Carl-Henric Svanberg met with the U.S. President Barack Obama. President Obama received a commitment that the British company would set up a $20 billion uncapped compensation fund for liabilities attributed to the Gulf oil spill.

The fund will not be controlled by either BP or by the U.S. government, but will be put in an escrow account, administered by an independent third party for the benefit of individuals and businesses affected by oil damage.

The fund does not include BP''s costs for repairing the environmental damage done by the oil spill nor fines and penalties the company may eventually have to pay.

At the meeting, BP also agreed to set up a $100 million fund for unemployed oil workers affected by the closure of deepwater rigs in the Gulf.

After speaking to Mr Svanberg, President Obama said he was confident BP would be able to meet its obligations ""to the Gulf Coast and to the American people.""

The $20 billion fund will be financed through dividend cut and the sale of $10 billion of assets.

UBS AG welcomed Swiss Parliamentary approval of the US-Swiss Government Agreement. UBS noted that it continues to focus on its comprehensive and timely compliance with all obligations under its separate settlement agreements with the U.S. Department of Justice and the Securities and Exchange Commission. The company said it is confident that it will meet regulatory deadlines in August 2010.

Swiss lawmakers approved a bill, which allows data on about 4,500 clients of UBS to be handed to the U.S. Internal Revenue Service by August.

Commodities, Currencies and Yields

Dollar edged lower against euro to $1.2380 and decreased against the Japanese yen to 91.29.

Crude oil decreased $0.45 to $77.22 a barrel for a front month contract, natural gas edged higher $0.06 cent to $5.04 per mBtu and gasoline increased 0.810 cents to 215.33 cents.

Gold increased $5.80 in New York trading to close at $1,236.30 per ounce, silver closed higher $0.024 to $18.46 per ounce and copper for the front month delivery decreased 5.150 cents to $2.96 per pound.

Yields on 10-year U.S. bonds increased to 3.27% and on 30-year U.S. bonds traded at 4.19%.

Stock Movers

Duke Realty Corporation rose 0.4% after the owner of industrial, office and retail properties announced that it intends to sell 23 million shares of its common stock in a public offering.

EXCO Resources, Inc. dropped 2.1% after the oil and gas producer announced an agreement to purchase properties prospective for the Haynesville and Bossier shales from Southwestern Energy Company for approximately $355 million, subject to customary purchase price adjustments.

Steel Dynamics, Inc. dropped 3.6%.

Earnings Review

Culp, Inc. ((CFI)), the mattress and upholstery fabric maker said fourth quarter sales rose 19.7% to $57.2 million from $47.8 million a year ago. Net income in the quarter rose 217.6% to $5.4 million or 41 cents per diluted share compared to net income of $1.7 million or 13 cents per share a year ago.

IHS Inc. ((IHS)), the business and market information provider said second quarter revenues rose 13% to $266.5 million from $235.3 million a year ago. Net income in the quarter rose 20.3% to $38.5 million or 60 cents per diluted share compared to net income of $32.0 million or 50 cents per share a year ago.

The J.M. Smucker Company ((SJM)), the branded food products manufacturer and marketer said fourth quarter net sales remained flat at $1.07 billion. Net income in the quarter rose 28% to $120.6 million or $1.01 per diluted share compared to $94.3 million or 80 cents per share a year ago.

Asian Markets Review

The Nikkei 225 Index in Tokyo closed lower 67.75 or 0.67% to 9,999.40, Hang Seng index in Hong Kong increased 76.25 or 0.38% to 20,138.40 and CSI 300 index in China lower 16.13 or 0.58% to 2,742.73. ASX 200 index in Australia decreased 31.70 or 0.70% to 4,527.30. The FTSE Bursa KL Composite index in Malaysia closed higher 1.34 or 0.10% to 1,304.47.

The Kospi Index in South Korea increased 2.59 or 0.15% to close at 1,707.92. SET index in Thailand closed higher 2.70 or 0.34% to 789.34 and JSE Index in Indonesia increased 32.44 or 1.13% to 2,891.10. The Sensex index in India increased 153.82 or 0.88% to 17,616.69.

Europe Markets Review

In London FTSE 100 Index closed higher 40.59 or 0.77% to 5,278.51, in Paris CAC 40 Index increased 29.33 or 0.80% to 3,705.26 and in Frankfurt DAX index traded higher 32.49 or 0.52% to 6,223.40. In Zurich trading SMI increased 6.80 or 0.10% to 6,496.87.