U.S. Borrowings Rise, European Voters Demand Growth with Austerity

Bikram Pandey
07 May, 2012
New York City

U.S. indexes recovered in the afternoon after market sentiment rebounded and bank stocks closed higher. U.S. consumer borrowing increased at the fastest pace in March as car loans and student loans drove the increase in loans. AIG bought back $2 billion of the $5 billion offering from the Treasury.

[R]4:10 PM New York – U.S. indexes recovered in the afternoon trading after market sentiment rebounded and bank stocks closed higher. U.S. consumer borrowing increased at the fastest pace in March as car loans and student loans drove the increase in loans. AIG bought back $2 billion of the $5 billion its stock offered by the U.S. Treasury.[/R]

U.S. indexes declined after election results in France and Greece but market sentiment recovered in the late afternoon.

Investors took a note of voter discontent in France but the newly elected President Francois Hollande has little leverage in changing the broad direction of the euro zone policies generally set by Germany.

However, Greek election sent another ripple of worries after two major parities failed to win a clear majority to form a government and smaller parties on the fringe gained parliamentary representation. Greece is likely to face turmoil for at least one more month as parties haggle to form a new government.

The euro was stable against the dollar and the price of crude oil and copper edged lower in commodities trading.

In other political news, Vladimir Putin was appointed for the third time as President of Russia and promised more reform at his short acceptance speech. Putin is also likely to face more resistance from the entrench bureaucracy and far flung regional governments spread across eleven time zones.

The U.S. Treasury priced $5 billion of offering of AIG stake to reduce its stake in the insurer to 63% from 70%. Treasury sold 163.9 million shares at $30.50 each, the third transaction in a year, according to a statement released by the Treasury. AIG bought back $2 billion of the offered $5 billion of its shares and the U.S. Treasury still owns $39 billion in the insurer.

Banks traded higher after the Fed said consumer borrowing rose at the fastest pace in March in more than a decade and increased by $21.4 billion to $2.54 trillion. The increase in borrowing was driven by $16.2 billion rise in longer term debts for student and car loans.

Cognizant Technology first quarter net rose 17% to $243.7 million but lowered current quarter outlook. Carl Icahn controlled fund agreed to acquire CVR Energy in cash for $2.6 billion. DISH Network first quarter net declined 34% to $360 million. Sysco said third quarter net was nearly flat to $259.6 million.

The European indexes edged lower after France elected its first Socialist president in 17 years and Greece is heading for coalition government talks that may drag on for ninety more days. QSC plunged after quarterly net plummeted 65%.

German factory orders increased 2.2% but Spanish output plunged 10.4% in March. Swiss consumer prices declined for the seventh straight month but jobless rate rose in April. The UK jobless rate forecasted to rise over the next five years.

Stocks in Tokyo plunged after election results in Greece and France prompted more worries in the euro zone. Resources linked companies fell after crude oil eased to a 4-month low and fell below $100 a barrel for the first time in the period. Social game developers plunged on the expectations of a regulatory crackdown.

Australian indexes declined more than 2% on the global slowdown worries after the election results in Europe. Australian retail sales were ahead of expectations in March but new jobs ads declined in April according to a private survey.

Commodities, Bonds and Currencies

The yields on 10-year U.S. bond closed unchanged at 1.88% and 30-year U.S. bond closed flat at 3.07%.

The U.S. dollar edged lower to $1.305 to one euro and inched lower against the Japanese yen to 79.93 yen.

Immediate delivery futures of Texas crude oil decreased 45 cents to $98.08 a barrel and Brent crude futures fell 14 cents to $113.32.

In New York trading, futures of natural gas increased 0.05 cents to $2.33 per mbtu and gasoline price rose 0.45 cents to 298.05 cents a gallon.

In metals trading, copper rose 3.7 cents to $3.75 per pound, gold fell $7.40 to $1,637.80 per ounce and silver decreased 39 cent to $30.07.