Payroll Decline Heralds U.S. Recession

123jump.com Staff
07 Mar, 2008
New York City

The Fed acted to bolster the liquidity in the credit market by increasing the size of the next two auctions to $50 billion each and also extended facility to lend $100 billion in the short term. The news helped to limit the declines in banks and brokerage stocks. The February payroll declined 63,000 after the revised employment in January fell 22,000. The sharpest decline in five years prompted economists to predict the arrival of recession. Thornburg Mortgage has margin call of $610 million.

[R]10:00PM Frankfurt, 4:00PM New York, 8:00AM Sydney – European markets closed lower after the U.S. February employment fell and euro hit another high this week.[/R]

Global Markets Update

The U.S. Fed acted to bolster the liquidity in the credit market by increasing the size of the next two auctions to $50 billion each and also extended facility to lend $100 billion in the short term. The news helped to limit the declines in banks and brokerage stocks. The February payroll declined 63,000 after the revised employment in January fell 22,000. The sharpest decline in five years prompted economists to predict the arrival of recession. Thornburg Mortgage has margin call of $610 million.

European markets closed lower on the worries that the U.S. economy may have entered a recession and rising strength in euro may hurt the corporate profits. Veolia Environment fell 10% after it reported a rise in earnings of 22%, but failed to meet analyst’s expectations. Sales increased 14% to 32.6 billion euros. AXA fell after Morgan Stanley commented on the poor outlook for 2008 earnings and lowered its price estimate to 34 euros. BMW sales in February rose 9% and for the first two months sales increased 4%.

UK stocks fell after base metal prices declined. China reported a decline in copper inventories, prompting a decline in mining stocks. Broader market fell on probable fire sale of mortgage securities of 25 billion francs. JD Wetherspoon, pub operator reported 0.4% decline in sales to £440 million and same store sales declined 2%. The company blamed poor results on smoking ban in public places. The pub operator hiked its dividend by 10% to 4.4 pence.

Stocks in Tokyo declined as financial markets worried that the ongoing U.S. economic slowdown will impact exports from Japan. The new foreclosure data in the U.S. suggested record rise in filings and outlook for the rest of the year is gloomy. Nikkei 225 fell 3.27% or 432.62 to 12,782.80 down 6% for the week, and the broader Topix Index tumbled 3.1% or 39.78 to 1,247.77.

Hang Seng fell 3.6% and closed down 7.5% for the week after the weakness in global markets dragged banks and energy companies. China Enterprise Index fell 9.5% for the week. China Netcom and Sun Hung Kai fell after brokers lowered their ratings on stocks.

European Markets

In London FTSE 100 Index closed lower 66.50 or 1.15% to 5,699.90, in Paris CAC 40 index decreased 59.09 or 1.26% to close at 4,618.96 and in Frankfurt DAX index lower 77.32 or 1.17% to close at 6,513.99. In Zurich trading SMI decreased 95.72 or 1.32% to close at 7,174.15.

North American Markets indexes

Dow Jones Industrial Average fell 146.70 or 1.22% to a close of 11,893.69, S&P 500 closed down 10.97 or 0.84% to 1,293.37, and Nasdaq Composite Index traded down 8.01 or 0.36% to a close of 2,212.49. In Toronto TSX Composite closed lower 102.26 or 0.77% to close at 13,258.18.

Of the 30 stocks in Dow Jones Industrial Average, 8 closed higher, 20 closed lower, and two were unchanged.

Alcoa led the decliners in the index with a loss of 4.2% followed by losses in Boeing of 3.5%, in du Pont of 3%, and in Chevron of 2.9%. IBM led the gainers in the index with a rise of 1.28% followed by increases in Intel of 0.86%, and in Intel of 0.86%.

Of the stocks in S&P 500, 158 closed higher, 339 fell, and three were unchanged. Of the index stocks, 7 rose more than 3% and 43 stocks fell more than 3%.

Washington Mutual fell 9.6% and led the decliners in the index followed by losses in MGIC Investment of 8.2%, in Monsanto of 7.6%, in Nordstrom of 6.66% and in Broadcom of 5.9%. National Semiconductor led the gainers in the index with a rise of 11% followed by increases in Ciena Corp of 10.9%, CIT Group of 5.9%, and in Fannie Mae of 4.33%.

South American Markets Indexes

In Latin Markets Argentina led the decliners in the region with a fall of 2.26% followed by decreases in Brazil of 1.82%, in Chile of 0.6%, and in Mexico of 0.18%. Colombia led the gainers in the region with a rise of 2.6% followed by increases in Peru of 0.4%.

Asian Markets

In Tokyo Nikkei 225 Index closed lower 432.62 or 3.27% to 12,782.80, in Hong Kong Hang Seng index decreased 841.40 or 3.60% closed to 22,501.33. Australia ASX 200 index decreased 171.50 or 3.16% to close 5,264.00.

In South Korea Kospi Index decreased 33.47 or 1.97% to close at 1,663.97, in Thailand SET index closed lower 6.14 or 0.74% to 821.57. Sensex index in India decreased 566.56 or 3.42% to 15,975.52. Indonesia markets were closed today.


Bond Yields increased on 10-year U.S. bonds to 3.55% and on 30-year bonds declined to 4.56%.

Commodities, Metals, and Currencies

Crude oil decreased 3 cents to close at $105.44 per barrel for a front month contract, natural gas increased 3 cent to $9.77 per mBtu, and gasoline futures increased 3.98 cents to close at 269.30 cents per gallon.

Gold decreased $2.90 in New York trading to close at $974.20 per ounce, silver closed up 2.5 cents to $20.25 per ounce, and copper for front month delivery increased 1.80 cents to 392.15 per pound.

Wheat futures decreased 20.00 cents in Chicago trading and closed at $11.05 per bushel. Sugar decreased 46 cent to 13.14 cents per pound. Soybean future closed down 50.00 cents to $14.08 per bushel.

Dollar edged lower and traded near a record low against euro to $1.53481 and edged higher against yen to 102.7750.