While you were sleeping: US trade gap, European stress tests

Wednesday 13th May 2009

The US trade deficit widened for the first time in eight months in March as exports dropped while oil imports climbed, slowing the decline in overall imports.

The US trade gap rose to a smaller-than-expected US$27.6 billion from a revised US$26.13 billion in February, according to the Commerce Department.

Exports fell 2.4% to US$123.6 billion while imports slipped 1% to US$151.20 billion. America’s trade deficit with China widened to US$15.6 billion from US$14.2 billion.

The US reported its first April budget deficit in 26 years, with spending outpacing revenue by US$20.9 billion, a turnaround from the year-earlier surplus of US$159.3 billion, according to the Treasury.

April is typically in surplus because of a pick-up in tax payments. In the fiscal year-to-date the deficit was US$802.3 billion, with the year-end gap forecast to reach a record US$1.75 trillion.

US home prices had a record slump in the first quarter, according to the National Association of Realtors, reflecting sales of foreclosed homes. Florida and California led the decline. The median house price fell 14% to US$169,000, the association said.

The US dollar weakened as traders took heart from data in China showing a surge in investments in factories and property, stoking optimism the global economic slump may be abating and lifting demand for higher yielding, or riskier assets.

The greenback slid to $1.3634 per euro from $1.3582 yesterday and dropped to 96.51 yen from 97.48. The euro traded at 131.61 from 132.40.

European Union regulators will follow the U.S. lead and conduct stress tests on the region’s banks, though results for individual banks won’t be released publicly.

Regulators from the 27 nations within the EU will supply banking industry data to assess market risks rather than capital adequacy.

European stocks fell for a second day as some investors deemed the recent rally in global equities had pushed valuations too high given the economic outlook.

The Dow Jones Stoxx 600 Index fell 0.2% to 206.18. Germany’s ThyssenKrupp dropped 6.4% after the steelmaker predicted a full-year loss. European Aeronautic, Defence and Space Co.G led basic-resources companies lower after Germany’s largest steelmaker said it expects to post a full-year loss.

EADS NV, Europe’s biggest aerospace company, fell 3.3% after posting a 40% drop in first-quarter profit.

The UK’s FTSE 100 slipped 0.2% to 4425.54, Germany’s DAX Index slid 0.3% to 4854.11 and France’s CAC 40 fell 0.5% to 3231.1. In the US, automaker stocks plunged.

Ford Motor Co. tumbled 13% to US$5.28 after announcing plans to sell 300 million ordinary shares to the public, boosting shares on issue by 11%. The timing of the sale allows Ford to take advantage of a 229% surged in its stock in the past three months as it seeks to cut debt by US$9.9 billion.

General Motors slumped 22% to US$1.13 and touched US$1.09, the lowest since 1933, as executives dumped stock of the automaker that is heading for bankruptcy or restructuring that would wipe out the value of existing stock holdings.

Six GM executives disclosed sales of about US$315,000 of shares as they sold their remaining holdings. GM must restructure or file for bankruptcy by June 1 under a government imposed deadline.

Shares were mixed on Wall Street. The Dow Jones Industrial Average rose 0.6% to 8469.11 and the Standard & Poor’s 500 slipped 0.1% to 908.35. The Nasdaq Composite fell 0.9% to 1715.92.

Pfizer rose 5.5% to US$14.93, Coco-Cola Co. gained 3.9% to US$44.40 and Microsoft rose 3% to US$19.89.Exxon Mobil climbed 2.2% to US$70.82 and Chevron rose 1.8% to US$69.22 as the crude oil reached a six month high.

Oil advanced after China reported a 14% in imports in April. Deliveries rose to a daily 3.9 million barrels, according to China’s customs department Crude oil for June rose 0.6% to US$58.83 a barrel on the New York Mercantile Exchange.

Gold futures for June delivery rose 1.1% to US$923.90 an ounce in New York.

Copper for delivery in three months rose 2.4% to US$4,675 a metric ton on the London Metal Exchange.

Businesswire.co.nz

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