U.S. Jobless Claims Falls, IMF Lifts Outlook

Arthi Gupta, Mayank Mehta and Sanjay Barot
08 Jul, 2010
New York City

U.S. stocks trade sideways and the latest weekly jobless claims declined to 454,000. The IMF lifts global growth outlook for 2010 to 4.6%. Time Warner prices $3 billion debt offering. The Bank of England retains key rate at 0.5% and the European Central Bank left the rate at 1%.

[R]9:35 AM New York – U.S. stocks trade sideways and the latest weekly jobless claims declined to 454,000. The IMF lifts global growth outlook for 2010 to 4.6%. Time Warner prices $3 billion debt offering. The Bank of England retains key rate at 0.5% and the European Central Bank left the rate at 1%.[/R]

Asian and European stocks surge on a better-than-expected U.S. retail sales data. The Japanese market soared 2.8% tracking the gains in the overnight trading in New York.

The International Monetary Fund today upwardly revised its forecast for global economy for the year 2010, and now anticipates global economy to grow 4.6% compared to its earlier forecast of a 4.2% growth. This would represent the fastest rate of global growth since 2007. Growth in 2011 is estimated at 4.3%, unchanged from the previous estimate.

At the same time, the international lender warned downside risks to global growth has heightened amid renewed financial market turmoil.

The IMF estimated growth in advanced economies at 2.6% in 2010, up from the 2.3% forecast in April. The U.S. economy is forecast to grow 3.3% this year, faster than the previous estimate of 3.1%. Japan''s growth outlook has been raised to 2.4% from 1.9%, and the euro-zone growth rate of 1% was unrevised.

First time claims for unemployment benefits fell by more than expected in the week ended July 3, according to a report released by the U.S. Labor Department today.

The initial jobless claims fell to 454,000 from the previous week''s upwardly revised figure of 475,000. The preliminary insured unemployment rate in the week ending June 26 fell to 3.4% from the prior week''s unrevised rate of 3.6%.

The Bank of England today left its key interest rate unchanged at a historic low and maintained the size of asset purchase scheme at £200 billion.

At the end of two-day rate setting meeting, policy makers led by Governor Mervyn King, decided to hold the official bank rate paid on commercial bank reserves at 0.5%. The current rate is the lowest since the central bank was established in 1694.

The European Central Bank today left its key interest rate unchanged at a record low of 1% for the fourteenth straight month.

The central bank also retained its interest rate on the marginal lending facility at 1.75% and that on the deposit facility at 0.25%. The ECB aims to keep inflation below, but close to 2% over the medium term.

Time Warner Inc., the media and entertainment conglomerate on Wednesday announced the pricing of its $3 billion debt offering in three parts.

The company priced a $1 billion underwritten public offering of 3.15% senior notes due 2015 at a price equal to 99.881% of their face amount. Another $1 billion underwritten public offering of 4.70% senior notes due 2021 is priced at a price equal to 99.762% of their face amount and a $1 billion underwritten public offering of 6.10% debentures due 2040 is at a price equal to 99.931% of their face amount.

Time Warner said the net proceeds from the issuance of the notes and debentures will be used to retire existing indebtedness and for general corporate purposes. The sale of the notes and debentures is expected to close on July 14.

Wells Fargo & Co. said on Wednesday it will eliminate around 3,800 positions next year as part of its effort to restructure its financial division, in an effort to raise operational efficiencies, streamline processes and controls, and provide a more consistent experience to customers.

The bank''s move involves consolidating its financial consumer division into its newly expanded community banking network that would result in the closing of 638 independent consumer finance offices across the U.S. and exiting the origination of non-prime portfolio mortgage loans.

The company will eliminate around 2,800 positions during the next 60 days and around 1,000 positions during the next 12 months. The remaining 10,200 of the 14,000 employees will be reassigned to other Wells Fargo businesses.

Commodities, Currencies and Yields

Dollar decreased against euro to $1.2646 and increased against the Japanese yen to 88.18.

Crude oil increased $0.70 to $74.77 a barrel for a front month contract, natural gas edged higher $0.04 cents to $4.60 per mBtu and gasoline increased 1.770 cents to 204.30 cents.

Gold increased $1.00 in New York trading to close at $1,199.90 per ounce, silver closed lower $0.005 to $17.99 per ounce and copper for the front month delivery decreased 0.200 cents to $3.01.

Yields on 10-year U.S. bonds increased to 2.97% and on 30-year U.S. bonds traded at 3.94%.

Stock Movers

Symantec Corporation fell 1.5% after the maker of computer-security software said Gregory Hughes, president of the company’s enterprise product group resigned on June 30.

Tractor Supply Company added 4.8% after the operator of 948 farm- equipment stores said net sales for the second quarter 2010 increased 12.6% to $1.07 billion from $946.5 million a year ago. Same-store sales increased 6.1% compared with a same-store sales decrease of 2.7% a year ago.

WellCare Health Plans, Inc. rose 1.0% after the health insurer announced today that the United States District Court for the Middle District of Florida today approved a partial settlement and granted a motion enabling the company to pursue claims against its former top executives, Todd Farha, Paul Behrens and Thad Bereday. In addition, the Court dismissed all claims against current and former directors.

Wells Fargo & Company rose 6% after the bank said 3,800 employees will lose their jobs as the company shutters its Wells Fargo Financial subsidiary.

Xcel Energy Inc. fell 0.7% after the owner of utilities said its forecast of $1.55 to $1.65 per share for 2010 earnings.

Earnings Review

WD-40 Company ((WDFC)), the household lubricants and cleaning products maker said third quarter sales rose 20% to $82.6 million from $68.8 million a year ago. Net income in the quarter rose 32% to $9.1 million or 54 cents per diluted share compared to net income of $6.9 million or 41 cents per share a year ago.

Asian Markets Review

The Nikkei 225 Index in Tokyo closed higher 256.09 or 2.76% to 9,535.74, Hang Seng index in Hong Kong increased 193.49 or 0.97% to 20,050.56 and CSI 300 index in China lower 4.56 or 0.18% to 2,575.92. ASX 200 index in Australia increased 102.10 or 2.40% to 4,356.70. The FTSE Bursa KL Composite index in Malaysia closed higher 4.28 or 0.33% to 1,316.03.

The Kospi Index in South Korea increased 22.99 or 1.37% to close at 1,698.64. SET index in Thailand closed higher 2.89 or 0.35% to 817.57 and JSE Index in Indonesia increased 13.86 or 0.48% to 2,915.91. The Sensex index in India increased 180.70 or 1.03% to 17,651.73.

Europe Markets Review

In London FTSE 100 Index closed higher 61.80 or 1.23% to 5,076.62, in Paris CAC 40 Index increased 38.66 or 1.11% to 3,522.10 and in Frankfurt DAX index traded higher 28.92 or 0.48% to 6,021.78. In Zurich trading SMI increased 60.17 or 0.99% to 6,159.37.