Obama Hints Firmer Tone in Debt Talks, Fed Estimate Improving Economy

Bikram Pandey
14 Jan, 2013
New York City

Stocks struggled in New York and merger deals drove market sentiment in Europe. President Obama hinted firmer tone in the next debt ceiling negotiations and Fed official estimated accelerating economic growth in the next two years. UPS abandoned its $6.9 billion deal to but TNT Express.

[R]1:40 PM, New York – Stocks struggled in New York and merger deals drove market sentiment in Europe. President Obama hinted firmer tone in the next debt ceiling negotiations and Fed official estimated accelerating economic growth in the next two years. UPS abandoned its $6.9 billion deal to but TNT Express. European industrial output struggles and markets in India surge.[/R]

Stocks in New York traded lower ahead of comments from Fed officials and President Obama on Monday warned Republicans in Congress against holding up revising debt ceiling at his last press conference of his first Presidential term.

“The full faith and credit of the United States of America is not a bargaining chip,” President Obama said at a White House press conference.

Citing Congressional Republicans, Obama added, “They will not collect a ransom in exchange for not crashing the American economy.”

Fed official Charles Evans said that the U.S. economy is expected to grow 2.5% in the current year and improve further to 3.5% in 2014. Evans also estimated the U.S. unemployment rate is likely to dip to 7.4% and may fall further to 7% in 2014.

Fed Chairman Ben S. Bernanke is scheduled to speak near the market close at a gathering in Michigan.

Tech stocks led the decliners on the speculation of weaker-than-expected demand for popular phones from Apple.

Apple Inc ((AAPL)) declined as much as 3% on the media speculation that demand for its popular phone devices is weaker than expected and the company may have cut component orders. Electronics components and chip makers, Cirrus Logic, Avago Technologies and Qualcomm Inc declined between 2% and 6%.

In merger news, Harry Winston agreed to sell its watch division to Swatch Group for $750 million. PPG Ind said fourth quarter net climbed 5%. UPS withdrew its $6.9 billion offer for TNT Express. V.F. Corp and Altamont offered to acquire Australia based Billabong for $555 million.

Fed official Charles Evans said that the U.S. economy is expected to grow 2.5% in the current year and improve further to 3.5% in 2014. Evans also estimated the U.S. unemployment rate is likely to dip to 7.4% and may fall further to 7% in 2014.

European markets were weak across the region but merger activities lifted larger markets. Industrial production declined 3.7% in November, third monthly decline in a row.

Industrial production fell 0.3% in November from October according to the latest data released by the eurostat, the statistics office of the euro zone based in Luxembourg.

The production index declined for the third month in a row even though the rate of fall had eased. The output index declined 2.3% in September and declined 1% in October.

From a year ago, industrial production declined 3.7% in November. Industrial output increased 0.1% in the month, a turnaround from the decline in two previous months, but still the data highlighted the difficulty faced by German exporters.

TNT Express plunged 49% after United Parcel Service Inc said it will abandon its $6.9 billion takeover offer for the company after European regulators said they will block the deal.

In Asian trading, markets in Tokyo were closed and the benchmark index in Shanghai surged 3.1% on comments from a regulator that China may open financial markets to foreign investors.

The benchmark index in India gained 1.2% after wholesale price index in December increased at a slower pace in three years at 7.1% and the government deferred tax proposal that included foreign investors till 2016. Rate sensitive banks and property stocks surged on the hopes of a rate cut.

Tata Consultancy Services Ltd, the largest outsourcing company from India said revenues in the third quarter to December increased 3.3% to $2.95 billion and net profit jumped to $648.4 million and said revenues in the year are likely to be ahead of the 11% industry growth in the year to March.

TCS also said number of clients spending at least $100 million increased to 16 from 14 and won 31 new clients in the quarter.

Australian stocks trimmed gains and new home loans approvals declined in November. Job advertisements fell for the tenth month in a row as businesses restrain from hiring on record strength in the dollar. Consumers repay debt to lower debt and repair personal balance sheet.

Commodities, Bonds and Currencies

U.S. treasury yield on 10-year bond closed down to 1.86% and on 30-year bond fell to 3.04%.

The U.S. dollar inched lower to $1.3365 to a euro and increased against the Japanese yen to 89.35 yen, a new low in two years.

Immediate delivery futures of Texas crude oil decreased 1 cent to $93.53 a barrel and Brent crude increased 51 cents to $111.51, futures of natural gas increased 7 cents to $3.40 per mbtu and gasoline traded up 0.43 to 274.32 cents a gallon.

In metals trading, gold increased $6.10 to $1,666.70 per ounce and silver increased 53 cents to $30.95 and copper closed up 1.80 cents to $3.63 a pound.