While you were sleeping: US jobless, Bernanke gets tough

Monday 9th March 2009

The US unemployment rate hit a 25-year high of 8.1% in February, with 651,000 jobs lost and losses for the previous two months revised bigger as companies eliminated workers in response to the prolonged recession.

Some 4.4 million American jobs have now been lost since December 2007. A total of 12.5 million people were unemployed last month, according to the Labor Department's non-farm payrolls report.

Stocks edged higher on Wall Street amid relief the jobs report wasn't even worse. The Dow Jones Industrial Average rose 0.5% to 6626.94 and the broader Standard & Poor's 500 Index was up 0.1% to 683.38. The Nasdaq Composite fell 0.4% to 1293.85.

General Electric rose 6% to US$7.06, leading the Dow higher, while Coca-Cola Co. climbed 3.3% to US$39.1. Chevron rose 3.2% to US$58.27 and Exxon Mobil gained 2.9% to US$58.27 as crude oil gained to a five-week high.

Still, benchmark indexes rounded out the worst weekly decline in three months, after American International Group (AIG) posted a US$61.7 billion loss, driving financial shares lower. Citigroup rose about 1% to US$1.03 after dipping below US$1 for the first time last week.

General Motors sunk 22% to US$1.45 on Friday after its auditor said the automaker may not be able to survive. JPMorgan Chase slid 4% to US$15.93, extending its slide on concern Moody's Investors Service will cut its credit rating.

Crude oil rose 4.4% on Friday in New York as the US dollar fell against the euro and on the prospects OPEC members will consider another round of production cuts when they meet this week.

Crude oil for April delivery rose $1.91 to $45.52 a barrel on the New York Mercantile Exchange.

Copper prices rose, rounding out a second weekly advance, on optimism demand in China, the biggest consumer of the metal, will rise as the government takes steps to stabilise economic growth.

Copper futures for May delivery rose 2.1% to US$1.689 a pound on the New York Mercantile Exchange.

Gold rose on Friday as some investors bought the precious metals as an alternative investment and the US dollar weakened. Gold futures for April delivery rose 1.6% to US$942.70 an ounce in New York on Friday.

The greenback weakened against the euro amid talk that worse US jobs data was expected by some investors.

The euro rose almost 1% to $126.59 per dollar. The greenback strengthened to 98.28 yen.

Fed chairman Ben Bernanke told an audience in Dillon, South Carolina that the US central bank will "forcefully deploy all the tools at our disposal as long as necessary to support the restoration of financial stability and the resumption of healthy economic growth."

President Barack Obama has drawn criticism from Republicans for his spend-our-way-to-recovery policies with a Business Week columnist saying Wall Street's honeymoon with Obama is over.

Meanwhile, Bernard Madoff, who allegedly masterminded a US$50 billion investment fraud, is expected to plead guilty to criminal charges this week, Reuters reported, citing court documents that indicated Madoff would waive an indictment and plead guilty.

In London, Business Secretary Peter Mandelson played down the potential scale of British bank nationalisations, saying the government can influence the direction of troubled lenders without having majority ownership. Nationalisation wasn't necessary or inevitable, Mandelson said in a BBC interview.

Lloyds Banking Group agreed to relinquish control to the government in exchange for receiving state guarantees in 260 billion pounds of risky assets.

Lloyds will become the fourth British bank to fall under government control since late 2007. Its shares rose 4.2% on Friday, helping nudge the FTSE 100 Index up 0.02% to 3530.73. Resources companies led the FTSE higher as commodity prices rose, with Eurasian Natural Resources Corp. climbing 6.9%. Rio Tinto climbed 5.3% and BHP Billiton rose 4.4%.

The Dow Jones Stoxx 600 Index slipped 1.3% to 159.52 as tech companies including Infineon fell more than 12% and UK TV company ITV dropped 17%. That helped offset soaring prices for Irish banks, with Bank of Ireland jumping 29% and Allied Irish Banks gaining 26%.

Germany's DAX 30 fell 0.8% to 3666.410 and France's CAC 40 dropped 1.4% to 2534.45.

Drugmaker Roche Holding raised its bid to buy out minority shareholders of Genentech by 7.5% to $93 a share and extended its offer for a week. Roche already owns 56% of US biotech company Genentech, whose shares jumped more than 11% on Friday.

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