House to Meet on Sunday, East Coast Dockworkers Threaten a Strike

Bikram Pandey
27 Dec, 2012
New York City

U.S. stocks trim losses after the House of Representatives decide to meet on Sunday. U.S. Treasury Department takes extraordinary steps to raise $200 billion. Dockworkers on the East Coast threaten a strike. The benchmark index in Germany is set to lead advanced markets with annual rise of 30%.

[R]4:00 PM, New York – U.S. stocks traded lower after lawmakers struggled to settle budget differences. U.S. Treasury Department takes extraordinary steps to raise $200 billion. Dockworkers on the East Coast threaten a strike. The benchmark index in Germany is set to lead advanced markets with annual rise of 30%.[/R]

Stocks on Wall Street fell after Senate Majority Leader Harry Reid said budget deal before the year-end is unlikely.

President Barack Obama called Congressional leaders to settle differences and Republican Party is set to hold a conference among members to discuss various options.

Separately, Treasury Secretary Timothy Geithner wrote in a letter to Congress yesterday that his department will be forced to use “extraordinary measures” to finance $200 billion in deficit in early months of 2013.

The U.S. is set to reach its debt limit $16.4 trillion at the end of week. The extraordinary measures to finance $200 billion in deficit would be enough to fill the gap for two months.

If Congress does not act to avoid automatic tax increase, average family may see an increase of $3,446, according to the nonpartisan Tax Policy Center in Washington.

Federal debt limit is expected to be reached on December 31 and a debt revision is caught in the so called ‘fiscal cliff’ negotiations.

The dock workers union of 145,000 is threatening a strike as early as Sunday that could shut down 14 ports from Massachusetts to Texas.

Last week, more than one hundred business groups requested President Obama to intervene and urged him to invoke emergency powers under the 1947 Taft-Hartley Act to declare the strike illegal.

On the economic front, weekly initial unemployment claims filed at the end of last week decreased 12,000 to 350,000, according to the latest data released by the U.S. Labor Department.

Separately, Commerce Department said new home sales increased to a 377,000 annual rate in November, the highest since April 2010.

The new home sales reached to the highest level in more than two years offering the latest evidence that the housing market is experiencing steady recovery.

Diodes agreed to buy BCD Semiconductor for $151 million in cash. Matson agreed to acquire assets of Reef Shipping. Opko Health agreed to acquire Sao Paulo based Silcon Comércio. Vale to sell 25% stake in Statoil for $40 million in cash.

The dollar reached a 27-month high against the yen after the yen traded as low as 85.75 on the prospect aggressive stimulus from the Japanese government.

Finance Minister Taro Aso said Prime Minister Shinzo Abe has requested stimulus bill that overrides the previous government limit set for bond offerings.

European markets traded higher and DAX index in Germany is set to lead the regional advance with a surge of 30%. BMW is expected to exceed 2011 profit and Audi unit of Volkswagen plans to spend €13 billion in new products development and manufacturing expansion.

Industrial profit in December increased to 22.2% in November from 20.5% in October, according to the data released by the Chinese government.

Italy sold €8.5 billion of 177-day bills in auction today that averaged 0.949% compared to 0.919% at the previous auction on November 28.

Italy is scheduled to raise as much as €6 billion in 5- and 10-year bonds tomorrow. The yield on 10-year bond rose 4 basis points to 4.51%.

British Banker’s Association said UK mortgage approvals in November increased to the highest level since January to 33,634 from 33,128 in October. Net lending in the month increased 164 million pounds.

The Nikkei index extended gains as the yen dropped to a new 2-year low and the newly elected government prepares for aggressive stimulus. The Nikkei surpassed the high on the day before the 2011 earthquake and extended six week rally to 16% and the gains in the year to 22.2%.

Australian stocks gained for the second day in a row as retailers and resource sector stocks led the advance. Fortescue Metals jumped 4% after the company announced a plan to resume Kings deposit expansion in January.

Commodities, Bonds and Currencies

U.S. treasury yield on 10-year bond closed at 1.71% and on 30-year bond fell to 2.87%.

The U.S. dollar inched lower to $1.3219 to a euro and increased against the Japanese yen to 85.94 yen.

Immediate delivery futures of Texas crude oil decreased 22 cents to $90.71 a barrel and Brent crude fell 31 cents to $110.76, futures of natural gas declined 4 cents to $3.35 per mbtu and gasoline traded up 56 cents to 282.14 cents a gallon.

In metals trading, gold increased $2.90 to $1,663.60 per ounce and silver gained 16 cents to $30.19 and copper closed up 0.40 cents to $3.60 a pound.