While you were sleeping: US posts better jobs data, lifting stocks, greenback

Monday 10th August 2009

America’s unemployment rate unexpectedly fell in July, while the pace of job losses slowed, stoking optimism the world’s biggest economy is through the worst of its economic decline.

Stocks rallied in the US and Europe and the greenback surged after the data on Friday.

Non-farm payrolls fell by 247,000 last month, with job losses almost halving from the previous month, according to the Labor Department. The jobless rate fell to 9.4% from 9.5%. The rate was forecast to rise to 9.6% and unemployment is still seen edging above 10% next year.

The latest losses brought the total number of positions shed since the recession began in December 2007 to 6.7 million.

President Barack Obama commented after the data that “the worst may be behind us”. The decline in unemployment was the first since April last year.

The Standard & Poor’s 500 rose 1.3% to 1010.48 on Friday, a 10-month high, while the Dow Jones Industrial Average climbed 1.2% to 9370.07. The Nasdaq Composite gained 1.4% to 468.07.

Walt Disney rose 5.2% to US$26.69, leading the Dow higher. American Express gained 4.4% to US$32.69 and JPMorgan Chase rose 4% to US$42.36.

Warren Buffett's Berkshire Hathaway Inc. posted its best quarterly earnings in about two years as the value of its stock holdings and derivatives increased with the pick-up in equity markets. Net income rose 14% to US$3.3 billion.

Berkshire Class A shares rose 1.1% to US$108,100 before the results were released.

American International Group’s shares soared 20% to US$27.14 after the insurer bailed out by the taxpayer in return for an 80% stake posted its first profit in seven quarters, US$1.8 billion, versus a year-earlier loss of US$5.4 billion.

The US dollar surged against the yen and rose against the euro as the jobs data stoked optimism for the US economy. The greenback’s advance indicated the forex market link of better economic prospects hurting the currency may be starting to break down in favour of a focus on the economic cycle and the prospect of higher interest rates.

The dollar jumped 2.3% to 97.55 yen on Friday, the biggest advance in more than five months. The euro weakened 1.2% to $1.4185 and gained 1.1% to 138.37 against the yen.

Bets on a Fed rate hike by the end of the year surged to 46% from 34% before the jobs data.

Copper rose, rounding out its fourth straight weekly advance, after the jobs data, bringing its surge this year to 98%.

Copper futures for September delivery rose 1.2% to US$2.7855 a pound on the New York Mercantile Exchange.

China's National Administration for the Protection of State Secrets said executives at Rio Tinto, the world’s third-largest mining company, had been engaged in commercial spying for six years, resulting in huge economic losses for that nation.

Crude oil slipped from a five-week high as the greenback’s gain reduced the appeal of commodities as an alternative investment.

Crude oil for September delivery fell 1.4% to US$70.93 a barrel in New York. Gold traded at US$953.8 an ounce, little changed from the previous day.

Frank DiPascali, chief financial executive at the investment advisory arm of Bernard L. Madoff Investment Securities LLC, will plead guilty to criminal charges for his role in the financier's US$65 billion fraud, Reuters reported, citing a letter by US prosecutors to US District Court Judge Richard Sullivan said.

In Europe, the Dow Jones Stoxx 600 rose 1.2% to 230.68 on optimism about a revival in the US economy.

Royal Bank of Scotland fell 12% after posting a first-half loss of 1 billion pounds and predicting two years of poor results. Bad debts soared to 7.5 billion pounds from a year-earlier 1.5 billion pounds.

Germany’s Allianz gained almost 1% after Europe’s biggest insurer reported a second-quarter net profit of 1.9 billion euros, up from 1.5 billion a year earlier. German real estate bank Hypo Real Estate fell 2% after it reported a net loss of 750 million euros and said it doesn’t expect to turn a profit until 2012.

Puma, the world’s third-biggest sports goods maker, fell 3.9% after posting a smaller than expected 16% drop in second-quarter profit and predicted a challenging second half.

Businesswire.co.nz

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