Weak U.S. Jobs, Egypt and Euro Worries Hobble World Markets

Bikram Pandey
04 Feb, 2011
New York City

U.S. stocks struggled after the jobs report showed weaker than expected increase in private sector and earnings rose at select companies. Middle East tensions also weighed on commodities. Markets in Japan and Australia rebounded and in Europe lost early momentum.

[R]4:00 PM New York – U.S. stocks struggled after jobs report showed weaker than expected increase in private sector and earnings rose at select companies. Middle East tensions also weighed on commodities. Markets in Japan and Australia rebounded and in Europe lost early momentum.[/R]

U.S. stocks traded sideways after unemployment rate declined to 9% in January from 9.4% in December. The increase was smaller than expected and investors worried that many long term people unemployed may have stopped looking for work. Long term unemployment was 13.9 million and net job creation in 2010 was revised lower to 909,000.

Private sector added net 50,000 jobs in the month and federal and state governments eliminated 14,000 jobs.

On the earnings front several companies reported a rise in earnings. Aetna fourth quarter revenue fell 2% to $8.54 billion but earnings improved. Aon fourth quarter revenue surged 40% to $2.91 billion. Las Vegas Sands fourth quarter net revenue increased 56.9% to $2.02 billion. Merck & Co. fourth quarter net revenue increased 20% to $12.09 billion.

European indexes opened higher but struggled near close. German Chancellor Merkel and French President Sarkozy proposed a meeting of 17 European nations to harmonize tax structure and delink wages from inflation and rationalize bank lending rules. The widespread disparities in the region have left several countries competing for businesses but labor mobility is restrictive.

However stocks in the UK closed higher and two separate reports indicated diverging views on the real estate market. Halifax survey indicated prices rose 0.8% in January and Knight Frank estimated decline in residential land prices in the year.

Supergroup, Rolls Royce, French Connection and William Morrison closed higher.

In Asian markets, stocks in Japan surged on the merger announcement between Nippon Steel and Sumitomo Metals Industries. Mitsubishi Estate Co said nine month net increased on sales rise of 0.8%. Nikkei index rose 1.1% today and gained 1.8% in the week.

Stocks in Mumbai dropped sharply and Prime Minister Singh noted inflation may derail India’s high growth initiatives. The widening corruption scandal that has hobbled the lower house of the Parliament also worried investors.

Delhi Court allowed five days of questioning of former telecom minister by the Central Bureau of Investigation. A. Raja is the first minister to be arrested while the ruling party is still in office.

Australian indexes closed at a 10-month high and the dollar advanced to a month peak on the rising commodities prices and the central bank estimate that the economy will recover from flood damages by the second half. QBE Insurance gained after it agreed to acquire Balboa Insurance for A$700 million.

Commodities, Currencies and Yields

Dollar edged up against euro to $1.358 and gained against the Japanese yen to 82.33. One UK pound fetched $1.610.

Crude oil decreased $1.76 to $88.78 a barrel for a front month contract, natural gas edged lower 0.02 cents to $4.32 per mBtu and gasoline decreased 6.2 cents to 244.16 cents.

Gold decreased $4.70 in New York trading to at $1,348.30 per ounce, silver increased $0.32 to $29.05 per ounce and copper for the front month delivery increased 3.5 cents to $4.58 per pound.

Yield on 10-year U.S. bond increased to 3.64% and on 30-year U.S. bond yield rose to 4.74%.