Lowered GDP Estimate; Stocks Decline

123jump.com Staff
22 Dec, 2009
New York City

U.S. stocks futures turned lower after the release of third GDP estimate for the third quarter. Weaker than expected inventories and construction investments and higher than expected deceleration in government spending affected the GDP estimate.

[R]9:00 AM New York – U.S. stocks futures turned lower after the release of third GDP estimate for the third quarter. Weaker than expected inventories and construction investments and higher than expected deceleration in government spending affected the GDP estimate.[/R]

U.S. stock futures trim their early gain after third estimate of the GDP was cut to 2.2%. The sharper inventory liquidation and lower than estimated government spending.

American International Group Inc halted the sale of its property and casualty insurance company Chartis. AIG chief executive has deemed the insurance group as its core holding and is not in favor of the unit’s public offering.

The Commerce Department lowered its estimate of the third quarter GDP expansion to 2.2%, its final and third read of the GDP. The original estimate of the third quarter GDP was revised lower to 2.2% in November from its original estimate of 3.5% expansion between July and September.

The estimate of corporate profits was revised higher to 10.8% from 10.6% and inventories dropped at a faster pace by annual rate of $139.2 billion. Residential construction increased at 18.9% but trade subtracted 0.8 percentage point from the GDP calculation.

UK GDP Contracts at 0.2%

The UK GDP contracted by 0.2% in the third quarter of 2009. This revised from fall of 0.3% in previous estimate of GDP. GDP remains 5.1% lower than the third quarter of 2008. Inventories continued to reduce, down £4.6 billion on the quarter.

Third quarter 2009 unemployment rate increased 0.1 percentage point to 7.8% compared to last quarter.

Greek Bonds Rally after Downgrade

The rating agency Moody’s Investor Services lowered its rating on Greek bonds by one notch to A2. The bonds rallied after investors had hoped for a deeper downgrade. Bond yields jumped declined to 5.73% from 6% before the downgrade. The bonds are still rates investment grade and are five notches higher than the non-investment grade.

Earnings Review

Jabil Circuit, Inc, the electronics parts maker said first quarter revenues fell 8.6% to $3.09 billion from $3.38 billion a year ago. Net income in the quarter was $28.3 million or 13 cents per diluted share compared to net loss of $275.9 million or $1.34 per share a year ago.

Navistar International Corporation, the truck and engine maker said fourth quarter sales fell 15% to $3.29 billion from $3.87 billion a year ago. Net income in the quarter was $86 million or $1.19 per diluted share compared to net loss of $343 million or $4.81 per share a year ago.

Net sales for the fiscal year 2009 fell 21% to $11.6 billion from $14.7 billion a year ago. Net income for the year rose 139% to $320 million or $4.46 per diluted share compared to net income of $134 million or $1.82 per share a year ago.

Asian Markets Review

The Nikkei 225 Index in Tokyo closed higher 194.56 or 1.91% to 10,378.03, and Hang Seng index in Hong Kong increased 143.94 or 0.69% to 21,092.04, and CSI 300 index in China lower 91.08 or 2.68% to 3,305.54. ASX 200 index in Australia increased 69.10 or 1.49% to 4,704.20. The FTSE Bursa KL Composite index in Malaysia was higher 4.76 or 0.38% to 1,260.42.

The Kospi Index in South Korea increased 11.31 or 0.69% to close at 1,655.54. SET index in Thailand closed higher 9.23 or 1.29% to 724.40. JSE Index in Indonesia increased 36.25 or 1.49% to 2,467.64. The Sensex Index in India increased 90.80 or 0.55% to 16,692.00.

Europe Markets Review

In London FTSE 100 Index traded higher 57.25 or 1.08% to 5,351.24, in Paris CAC 40 Index increased 26.79 or 0.69% to 3,898.85 and in Frankfurt DAX index traded higher 24.34 or 0.41% to 5,954.87. In Zurich trading SMI increased 66.37 or 1.02% to 6,570.81.