White House Urges European Leaders to Act, Trade Deficit Shrinks

Devan Biswas
08 Jun, 2012
New York City

Wall Street gained on the expectations of speedy approval for Spanish banking bailout. European markets closed higher. Chesapeake Energy plans to sell its pipeline infrastructure for $4 billion. President Barack Obama urged Greece not to leave the euro zone and asked European leaders to aid banks.

[R]12:05 PM New York – Wall Street retained positive bias as expectations rose of speedy approval for the bailout request from Spain. European markets closed higher. Chesapeake Energy plans to sell its pipeline infrastructure for $4 billion. President Barack Obama urged Greece not to leave the euro zone and asked European leaders to aid the troubled banking sector.[/R]

Stocks on Wall Street traded higher as talks of Spain seeking a bailout as early as this weekend gathered momentum. Chesapeake Energy Corp plans to sell its pipeline infrastructure business for $4 billion in three separate transactions.

U.S. trade deficit in April contracted 4.9% to $50.1 billion from revised $52.6 billion in March according to the latest data from the Commerce Department. Trade deficit with China increased to $24.6 billion in the month from $21.6 billion a year ago month.

Exports in the month declined 0.8% to $184.4 billion and imports fell 1.7% to $233 billion. The deficit related to petroleum products decreased 2.2% to $28 billion and the energy hungry nation’s import increased to $29.7 billion in April from $29.2 billion in March and the average price of a barrel was the highest since August of 2008 at $109.94.

Separately the Commerce Department also said wholesale inventories increased 0.6% from March to a seasonally adjusted $483.5 billion in April, an increase of 8.2% from a year ago month.

Stocks were on the defensive at the opening after central bankers and financial leaders failed to specify steps to arrest the widening contagion in the euro zone.

European Central Bank left its key rate on hold this week but passed the responsibility to revive the long term health of the economy to politicians and the Bank of England held its lending rate at same where the rates have been for three years.

The meeting of finance ministers and central bankers early in the week also failed to calm market jitters with any clear direction to stem the slow moving but widening contagion in Europe.

Spain successfully sold 2.1 billion of bonds but only after domestic banks took all the offering that does not bode well for the sovereign bond markets.

Talks of Spanish bank bailout gathered momentum after a report from the International Monetary Fund and the rating agency Fitch expressed concerned about the banks in the nation.

The IMF report estimated Spanish banks may need between 40 billion and 100 billion euros of bailout. Fitch Ratings lowered its outlook on Spanish debt by three notches and one level ahead of the junk status citing bad real estate loans.

Reuters reported earlier in the day that Spain is likely to request a bailout from the European rescue fund as early as tomorrow and economists speculated that troubled nation may tap as much as 40 billion euros.

The euro zone ministers are expected to hold a special meeting as early as tomorrow afternoon to expedite the approval of the loans according to the Reuters report.

Stock Movers

Chesapeake Midstream Partners, L.P ((CHKM)) gained 58 cents to $25.65 after the oil and gas explorer reported Global Infrastructure Partners agreed to acquire all of Chesapeake Energy Corporation’s ((CHK)) ownership interest for $2 billion. The acquisition is expected to close by June 29.

McDonald’s Corporation ((MCD)) slides 1.9% or $1.72 to $86.65 after the restaurants operator said global comparable sales growth of 3.3% in May. U.S. comparable sales rose 4.4% in Europe increased 2.9% and Asia/Pacific, Middle East and Africa reported a comparable sales decrease of 1.7% in May.

Progress Software Corporation ((PRGS)) plunged 10.6% or $2.16 to $18.06 after the data solution provider reported preliminary revenue in the second quarter ending in May to decline between 15% and 18% to $110 million compared to $115 million in the same period last year. Non GAAP diluted earnings is expected to be decline of between 51% and 56% to 17 cents to 19 cents per share a year ago period.

The Cooper Companies, Inc ((COO)) slipped 3.8% or $3.09 to $76.97 after the medical products maker reported total net sales in the second quarter ending in April grew 6% to $344.6 million compared to $325.3 million in the same period last year. Net income in the quarter surged 55% to $54.9 million or $1.12 per diluted share compared to $35.4 million or 73 cents per share a year ago quarter.