Jobs Report Drag Wall Street, European Markets and Oil Lower

Bikram Pandey
06 Jul, 2012
New York City

U.S indexes accelerated losses after the latest employment report confirmed weak economy. Net monthly hiring declined sharply in the second quarter. London is under scrutiny as the decades of light regulation risks reputation of the city as Libor scandal widens. Oil falls more than 3%.

[R]5:20 PM New York – U.S indexes accelerated losses after the latest employment report confirmed weak economy. Net monthly hiring declined sharply in the second quarter. London is under scrutiny as the decades of light regulation risks reputation of the city as Libor scandal widens.[/R]

U.S. indexes declined after payrolls in June increased less than expected. The mood on Wall Street soured after the latest employment report confirmed weak economic growth and weaker employment market.

Employers added on an average 75,000 jobs a month in the second quarter after adding jobs at 225,000 a month in the first quarter of this year. New hiring has slowed in the last three months.

The total number of unemployed persons was nearly unchanged at 12.7 million and unemployment rate held at 8.2% in the month when compared to the previous month but declined from 9.1% from June 2011 when the employers added 84,000 new jobs.

The number of long term unemployed was essentially unchanged at 5.4 million, yet the Congress resists in passing more measures to approve infrastructure projects that will create jobs.

The latest monthly employment data offered another weak growth signal as employers add just enough jobs that match population growth. The hiring slowed since March and the strong additions in the last November and December have not been matched for six months.

Economists were anticipating at least 95,000 net new jobs additions in the month. The smaller increase in payrolls by now should have overcome the early arrival of spring but the persistent weakness in jobs creation may indicate deeper problems in the U.S. economy.

The IMF said it is likely to lower its global growth outlook and issued a cautious view on the world economy as growth falters in the advanced and emerging economies.

In corporate news, Christopher & Banks rejected unsolicited takeover proposal. Informatica lowers second quarter estimates. LaCrosse agrees to be acquired by Japan based ABC-Mart. Seagate lowered fourth quarter sales and margin outlook.

The embattled electronics retailer, Best Buy Co ((BBY)) is planning to cut 600 positions in its Geek Squad technical support division and 1,800 other store workers as it looks to restructure operations to save $800 million in costs. The cuts add up to about 1.4% of the company’s total positions of 167,000.

The European indexes dipped. SGS agreed to acquire Belgium-based Exprimo. Peugeot slumped after first-half worldwide sales declined unlike sales at BMW and Volkswagen powered by sales in China and Asia.

In economic news, Industrial production in Germany rose more than estimated but Spanish industrial production fell in May. French deficit narrowed in June.

The UK indexes slid after output price inflation eased in June. London trading desks are targets by regulators for their systemic weakness. Aviva lowered its stake in Delta Lloyd. Seagate Technology slumped 3.1% on weak outlook.

Regulators around the world step up the scrutiny of UK based and operated banks after the latest Libor and Euribor scandal draws attention to the culture of greed and reckless trading in the city. At least eleven law suits have been filed against Barclays and other banks in New York City alleging losses linked to the Libor manipulation.

It is widely perceived that UK regulators and central bank officials are lagging and generally outsmarted by global banks operating in London.

The latest Libor scandal in London is expected to widen and followed other scandals of large investment losses at UBS, JP Morgan, AIG, Lehman Brothers and Bear Stearns.

Tokyo averages decreased but gained for the fifth week in a row. Investors added to stocks in telecom, retail, banks and real estate sectors and preferred stocks active in the domestic economy.

Australian indexes traded lower on Friday but managed to close up 1.5% in the week. Resources stocks fell after commodities prices weakened on the worries of economic slowdown in China. The Australian dollar closed up for the eight week in a row against the euro.

Commodities, Bonds and Currencies

The yield on 10-year bond decreased to 1.54% and on 30-year bond fell to 2.66%.

The U.S. dollar inched higher to $1.227 to a euro and increased against the Japanese yen to 79.59 yen.

Immediate delivery futures of Texas crude oil decreased $3.10 to $84.12 a barrel and Brent crude decreased $2.85 to $97.85, futures of natural gas fell 0.16 cents to $2.78 per mbtu and gasoline price declined 4.9 cents to 271.55 cents a gallon.

In metals trading, copper fell 7.9 cents to $3.41 per pound, gold decreased $26.00 to $1,583.40 per ounce and silver decreased 60 cents to $27.07.