Indexes in U.S and Europe Rise Above 1%

Bikram Pandey
03 Sep, 2010
New York City

U.S. indexes gained more than 1% and added between 2.4% and 3.6% in the week. The better-than-expected private sector job additions and an increase in hours worked and hourly rates also contributed to the sentiment. Fed Chairman said he failed to see the structural weakness in financial system.

[R]4:00 PM New York – U.S. indexes gained more than 1% and added between 2.4% and 3.6% in the week. The better-than-expected private sector job additions and an increase in hours worked and hourly rates also contributed to the sentiment. Fed chairman Bernanke said he failed to see the structural weakness in financial system.[/R]

U.S. stocks gained after the release of better than expected jobs report in August. Private sector added jobs in the month and the additions for June and July were revised higher.

Fed Chairman Ben Bernanke told lawmakers on Thursday that a lack of regulation in the shadow banking system was one of the key triggers in the 2008 economic and financial crisis. He also admitted that he failed to see the flaws in the financial system, three years after famously he predicted that subprime crisis is “contained.”

Speaking at a hearing before the Financial Crisis Inquiry Commission in Washington, D.C., Bernanke said that shadow banks (non-depository institutions) were the source of key vulnerabilities that amplified the initial financial shock that began with the subprime mortgage crisis.

The Fed chief said that the Federal Reserve had no authority to regulate the shadow banks and address their liquidity problems until the crisis had already decimated the economic and financial system.

For the week, the Dow added 2.6%, the Nasdaq increased 3.5% and the S&P 500 index advanced 3.6%.

HP agreed to acquire 3PAR for $2.35 billion. Burger King agreed to be acquired by 3G Capital for $4 billion. Avis Budget revised offer to $40.75 per share to buy Dollar Thrifty. BP noted oil spill costs rose to $8 billion.

H&R Block Inc surged 7% after it operated smaller operating loss. Campbell Soup Co declined after it estimated annual earnings at the low end of the range. Take-Two Interactive Software Inc soared more than 10%. Employment agencies surged after unemployment data.

The European indexes advanced after euro area retail sales climbed in July and service sector growth rose to a three-month high in August. Novartis discovered compound for treatment of drug-resistant malaria. Carnegie acquired HQ Bank and HQ Fonder.

The UK indexes rose after service sector continued to expand for the sixteenth successive month in August. The UK construction orders slumped in the second quarter and net reserves rose in August.

Stocks in China fell but in Hong Kong rallied near close. Land acquisitions almost quadruple in Shanghai in August. Ping An plans to consolidate its banking arm. GM’s China units register a record sale in August.

Stocks in Japan rallied for a third day this week and close up in a week in more than a month. Capital expenditure in the quarter to June declined. August monetary base rises in Japan. U.S. auto sales of Toyota dropped 34% and Honda plunged 33%.

Stocks in Mumbai traded sideways. Bajaj Auto reported record monthly August sales. Motorcycles and auto sales surged in August as consumers take advantage of low interest rates. HPCL plans to invest in a crude oil refinery in Raigad, Maharashtra.

Stocks in Australia rallied to push the weekly gain of 4%. New vehicles sales rose 12.1% in August. Qantas loses it appeal against a Federal Court ruling. Newcastle port has longer waiting list of ships to be loaded.

Commodities, Currencies and Yields

Dollar edged lower against euro to $1.289 and rose against the Japanese yen to 84.44.

Crude oil decreased $0.57 to $74.45 a barrel for a front month contract, natural gas edged higher 0.16 cent to $3.92 per mBtu and gasoline decreased 0.31 cents to 191.85 cents.

Gold decreased $4.30 in New York trading to close at $1,249.00 per ounce, silver increased $0.23 to $19.90 per ounce and copper for the front month delivery increased 0.85 cents to $3.50 per pound.

Yields on 10-year U.S. bonds increased to 2.71% and on 30-year U.S. bonds yields edged up 3.79%.