U.S. Markets Turn Down on Jobs Report; Active Global Deal Making

Bikram Pandey
03 Jun, 2011
New York City

U.S. stocks fell after payrolls increase in May lagged. The private sector additions were in the service sector. Deal making remains active despite weakening economic backdrop. Walgreens buys drugstore.com, Groupon files to raise $750 million and Samsonite looks for investors in Hong Kong.

[R]4:00 PM New York – U.S. stocks declined after payroll increase in May lagged expectations. The private sector additions were largely in the service sector. Deal making remains active despite weakening economic backdrop in the U.S. Walgreens acquires drugstore.com, Groupon files to raise $750 million and Samsonite looks for investors in Hong Kong.[/R]

The U.S. indexes declined after non-farm payrolls rose at the slowest pace in a year. The latest employment data added to a chorus of weak economic reports this week and globa economic backdrop also weakened.

Moody’s warned that the U.S. faces a possible debt rating downgrade if legislators fail to agree on raising debt limit soon. Most investors questioned the timing of the warning and viewed the rating company’s views as too late and ineffective.

In merger news, Walgreens agreed to acquire drugstore.com for $409 million.

In earnings reports, Blyth reported first quarter net loss of $3.0 million. Cascade first quarter net income surged 190% to $16.4 million. Quiksilver reported second quarter net loss of $83.3 million. SAIC first quarter net income rose to $131 million. VeriFone second quarter net income soared 24.6% to $25.2 million.

Across the Atlantic, the euro-zone and French private sector growth eased in May. German private sector activity weakened to a seven-month low. The export price index in Spain rose at a slower pace in April. Romanian retail sales fell and Czech retail sales improved in April.

The European indexes traded sideways on Greek debt worries. U.S. Treasury proposed to sell Chrysler stake to Fiat for $560 million and Samsonite planned to raise $1.5 billion in a Hong Kong IPO.

The UK indexes traded flat after construction orders slumped in the first quarter and service sector growth slowed in May. Ireland services sector activity improved In May. WPP acquired a 70% stake in Brazilian digital agency Grïngo.

Stocks in Japan closed lower as political uncertainties dominated Tokyo trading. A series of U.S. weak economic reports and global economic slowdown also contributed to market jitters. The Bank of Japan purchased the largest amount of stock ETFs on Thursday.

Stocks in Mumbai trading fell on the rising commodities prices and persistent inflation worries. Reliance Industries Ltd, the most valued company in India plans to be debt free at the end of the current fiscal year and the stock fell 1.7% on the natural gas output worries.

The Australian benchmark index declined for the third day in a row and closed down 2.2% for the week. BHP Billiton workers in Bowen Basin mines approved the right to call strike by the union. Qantas offered voluntary redundancies to as much as 5% of its cabin crew.

Commodities, Bonds and Currencies

The 10-year bond yield decreased to 2.99% and 30-year bond rose to 4.23%.

The U.S. dollar decreased to $1.463 to a euro and fell against the Japanese yen to 80.26 yen.

Immediate delivery futures of Texas crude oil increased $0.07 to $100.47 a barrel and futures of natural gas fell 0.10 cents to $4.69 per mbtu and gasoline prices added 3.04 cents to 299.81 cents a gallon.

In metals trading, copper increased 3.65 cents to $4.12 per pound, gold gained $11.20 to $1,543.90 per ounce and silver fell $0.05 to $36.15.