U.S. Jobless Claims Drop; Central Banks in China, Europe Act

Arthi Gupta
05 Jul, 2012
New York City

U.S. indexes rose after weekly jobless claims fell and private sector employment rose in June. The European Central Bank cut key rate to 0.75% and the Bank of England expanded asset purchase plan. Walgreen agreed to purchase a regional drugstore chain for $438 million.

[R]9:35 AM New York – U.S. indexes rose after weekly jobless claims fell and private sector employment rose in June. The European Central Bank cut key rate to 0.75% and the Bank of England expanded asset purchase plan. Walgreen agreed to purchase a regional drugstore chain for $438 million.[/R]

U.S. indexes edged higher after weekly jobless claims fell 14,000 and private sector employment rose more than anticipated in June.

European indexes gained after the European Central Bank cut key rate to 0.75% from 1% and the Bank of England restarted its bond purchase after hating the expansion for two months and increased the size of its asset purchase plan by £50 billion to £375 billion.

The European Central Bank reduced the main refinancing rate by 25 basis points to 0.75%, as estimated. It was the first rate cut since December.

The central bank also lowered its deposit rate by 25 basis points to zero and the marginal lending facility rate was also cut to 1.50% from 1.75%.

Separately, the Bank of England decided to raise the size of its asset purchase plan by £50 billion to £375 billion but maintained its record low interest rate. The central bank said it will take four months to complete the purchase.

Spain and France debt yields rose at separate auctions today. The Spanish Treasury raised a total €3 billion from the auction of 3-year, 4-year and 10-year bonds.

The Agence France Tresor raised a total €7.826 billion from the sale of bonds maturing in 2019, 2022 and 2023.

Germany''s factory orders grew unexpectedly 0.6% in May from a month ago, the Federal Ministry of Economy and Technology said.

Rating agencies Standard & Poor''s and Moody''s cut their respective outlook on Barclays Bank plc to ''negative'' from ''stable.''

Asian stocks closed mixed ahead of the central bank decisions in Europe.

China reduced its interest rates for the second time this year to accelerate its slowing economic growth.

The People''s Bank of China cut the one-year deposit rate by 25 basis points and the one-year lending rate by 31 basis points. The reserve requirement ratio was left unchanged.

Global food prices declined for the third straight month in June, data from a survey by the Food and Agriculture Organization showed today.

The food price index, a measure of the monthly change in average international prices of a basket of food commodities, declined 1.8% from a month ago in June.

U.S. Weekly Jobless Claims Drop

New unemployment claims fell more than estimated for the final week of June, according to data released by the U.S. Labor Department today.

Seasonally adjusted weekly jobless claims decreased 14,000 to 374,000 from the previous week''s revised figure of 388,000.

The four-week moving average of new unemployment claims decreased 1,500 to 385,750 from the previous week''s revised average of 387,250.

U.S. Private Sector Employment Soars

Private sector employment in the U.S. rose more than anticipated in June, according to a report released by payroll processor Automatic Data Processing today.

ADP said the private sector added 176,000 jobs in June following an upwardly revised increase of 136,000 jobs in May.

[Walgreens to Acquire Drug Pharmacy Chain

Walgreen Co. agreed to purchase a regional drugstore chain in the mid-South region of the United States from Stephen L. LaFrance Holdings, Inc. and members of the LaFrance family.

The transaction includes 144 stores, corporate offices, a distribution center and a wholesale and private brand business for a total of approximately $438 million.

Earnings Review

Costco Wholesale Corporation ((COST)), the membership warehouses operator reported net sales of $9.18 billion for June month or the five weeks ended July 1 up 6% from the same period last year. Five-week periods for both years included 34 days in the U.S. and Canada.

Comparable sales for the period rose 3%, with sales rising 3% in the U.S. and 2% at international locations.

International Speedway Corporation ((ISCA)), the motorsports entertainment facilities owner said second quarter total revenues rose 29% to $179.6 million. Net income for the quarter gained 15% to approximately $13.7 million or 30 cents per diluted share compared to net income of approximately $11.9 million or 25 cents per diluted share, in the prior year period.

Walgreens Company ((WAG)), the drugstore chain operator said sales declined 6.8% to $5.63 billion in June and comparable stores sales fell 10%.