U.S. Recession Deeper Than Estimated; World Markets on the Edge

Bikram Pandey
29 Jul, 2011
New York City

U.S. stocks struggled in anticipation that the House will make a progress on the debt vote and the Senate and the White House will find the agreement with the opposition. GDP growth slowed to 1.3% in the second quarter and depth of the 2007-2009 recession was revised deeper.

[R]4:15 PM New York – U.S. stocks struggled in anticipation that the House will make a progress on the debt vote and the Senate and the White House will find the agreement with the opposition. GDP growth slowed to 1.3% in the second quarter and depth of the 2007-2009 recession was revised deeper.[/R]

U.S. indexes declined after the GDP expanded at a slower pace of 1.3% in the second quarter. The Commerce Department also revised the economic growth data going back to 2007 indicating that the recession was deeper than earlier estimated and the economic recovery since then has been slower and uneven.

The gross domestic product decline was revised to 5.1% from the fourth quarter of 2007 to the second quarter of 2009 from the previous estimate of 4.1%. The economy has never been in such a dire state since 1957-58.

In addition, fourth quarter decline was revised to 8.9%, the worst quarterly decline since 1958. Economy shrank in 2008 at 0.3% compared to the previous estimate of nearly flat, contracted at 3.5% in 2009 compared to 2.6% and expanded at 3% compared to 2.9% estimate.

The debt ceiling impasse continued after the Republican lawmakers delayed a critical vote till this evening at 6 p.m. ET and struggled to garner support of the party members.

In earnings news, American Electric Power second quarter net earnings increased to $352 million. Amgen second quarter net income fell to $1.17 billion. Chevron second quarter net income surged to $7.73 billion. Merck second quarter net income rose to $2.02 billion and plans to cut 13,000 jobs. Starbucks third quarter net earnings rose 34.2% to $2.8 billion.

European indexes traded lower after ratings agency placed Spain''s ratings on review for possible downgrade. The U.S. debt ceiling impasse added to traders’ woes and overshadowed earnings from EDF, Continental, and EADS.

Euro-zone inflation eased to 2.5% in July. German retail sales rose more than estimated and French consumer spending improved in June. Spain jobless rate declined to 20.9% in the second quarter.

The UK indexes dropped after consumer confidence fell to a two-year low in July and home prices increased 0.2% in July. UK mortgage approvals increased in June. British Sky Broadcasting net declined 8%.

Stocks in Japan declined for the third day in a row as the U.S. faces debt default and a rating downgrade. The irresponsible lawmakers in the House are playing reckless with the U.S. economic recovery and the endangering world economic growth. Nintendo plunged 20% on weak sales and Nisshin Steel lifted earnings estimate.

The Australian benchmark index declined to 11-month low as the global economic growth was endangered by the irresponsible U.S. lawmakers. U.S. is only three days away from a debt default that could slow the incipient economic recovery and raise rates worldwide.

Commodities, Bonds and Currencies

The 10-year U.S. bond yield decreased to 2.80% and 30-year U.S. bond closed down at 4.14%.

The U.S. dollar decreased at $1.438 to one euro and fell against the Japanese yen to 76.94 yen.

Immediate delivery futures of Texas crude oil decreased $1.53 to $95.10 a barrel and futures of natural gas decreased 0.08 cents to $4.15 per mbtu and gasoline price decreased 0.47 cents to 311.29 cents a gallon.

In metals trading, copper increased 1.25 cents to $4.48 per pound, gold rose $11.50 to $1,627.70 per ounce and silver increased $0.18 to $39.97.