While you were sleeping: US retail sales disappoint, euro gains

Friday 14th August 2009

U.S. retail sales unexpectedly fell last month, suggesting higher unemployment and reduced household incomes is constraining consumer spending, putting a drag on the economic recovery.

Sales fell 0.1% in July, the first decline in three months, led by a fall at department stores, according to the Commerce Department. A gain of about 0.8% was expected by economists.

Excluding auto related sales, the decline was 0.6%, the biggest slide since March.

More Americans filed claims for unemployment insurance last week, according to the Labor Department. First-time claims rose to 558,000 last week from 554,000 seven days earlier.

Wal-Mart Stores Inc., the world’s biggest retailer, reported second-quarter net income of US$3.44 billion, or 88 cents a share, beating estimates as the downturn lured consumers to it cut price goods. Shares of the retailer climbed 2.7% to US$51.88.

U.S. Treasuries rose after the retail sales figures, amid speculation inflation remains benign and an economic recovery will be only gradual. Bonds also rose after stronger than expected demand at an auction of a record US$15 billion of 30-year Treasuries.

The yield on the 10-year notes fell 10 basis points to 3.61% while the yield on 30-year Treasuries declined 10 points to 4.43%.

The 30-year bonds drew a yield of 4.541%in the auction, lower than the 4.556% forecast in a Bloomberg survey. The bid-to-cover ratio was 2.54.

Indirect bidders, which include foreign central banks, bought 48.1% of the debt, down from 50.2% in July’s auction.

The Libor-OIS spread, which gauges the reluctance among banks to lend, fell 1 basis point to 25 basis points today, the lowest since at least January last year, according to Bloomberg.

The Dow Jones Industrial Average climbed 0.4% to 9398.19 and the Standard & Poor’s 500 rose 0.7% to 1012.73. The Nasdaq Composite climbed 0.5% to 2009.35.

Bank of America led the Dow higher, climbing 6.7% to US$17.00. Aluminium producer Alcoa Inc. gained 5.8% to US$13.71 as prices of metals strengthened.

The euro rose for a third day against the greenback after figures showed Europe’s economy contracted less than expected in the second quarter, while the biggest economies, Germany and France, had a return to growth, with both reporting a 0.3% expansion.

Gross domestic product in the region shrank 0.1%, just a fifth of the 0.5% contraction expected by economists.

The euro rose to $1.4280 against the dollar from $1.4188 and gained to 136.17 yen from 136.32. Japan’s currency strengthened to 95.35 per dollar from 96.06.

Stocks in Europe rose after the better-than-expected economic data. The Dow Jones Stoxx 600 Index climbed 0.8% to 230.48.

Prudential Plc, the biggest U.K. insurance company, jumped 11% after posting operating earnings that beat estimates in the first half, falling to 1.25 billion pounds.

BHP Billiton gained 2.3% and Rio Tinto climbed 4.2% after metals rose, led by copper.

United Internet jumped 13%, leading the Stoxx 600 higher, after reporting a 1.4% gain in first-half EBIT and raising its full-year forecast.

TUI AG, the owner of Europe’s largest travel agents, rose 10% after its part-owned shipping line Hapag- Lloyd was reported to have reached an agreement for funding.

Anheuser-Busch InBev, the world’s biggest brewer, fell 6% after chief financial officer Felipe Dutra said the company’s second-half margin will be smaller than in the first half.

Volkswagen AG, Europe’s largest carmaker, slipped 0.1% after announcing it will pay about 3.3 billion euros for 42% of Porsche SE’s automotive unit, as the two manufacturers move toward a merger by 2011.

The U.K.’s FTSE 100 rose 0.8% to 4755.46 and France’s CAC 40 gained 0.5% to 3524.39. Germany’s DAX 30 gained about 1% to 5401.11.

Copper rose to a 10-month high on the better-than-expected European economic data and after the Federal Reserve said recession in the U.S. is abating.

Copper for September delivery jumped 3.2% to US$2.914 a pound on the New York Mercantile Exchange.

Crude oil rose after better than expected economic data from Europe stoked optimism demand for fuel will rise. Crude for September delivery rose 0.5% to US$70.52 a barrel on the New York Mercantile Exchange. So far this year, oil futures have soared 58%.

Gold futures for December delivery gained 0.4% to US$956.50 an ounce in New York.

Businesswire.co.nz

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