Days to the General Election: 24
See Party Policies here. Party Lists here.

BusinessDesk: "US growth to be extremely lumpy and possibly tenuous if Europe's recession deepens"

BusinessDesk: "US growth to be extremely lumpy and possibly tenuous if Europe's recession deepens"

The tables were turned today as disappointing economic data from the US overshadowed better-than-expected demand for bonds sold by struggling euro-zone nations Spain and Italy.

Reports showing that US retail sales rose less than expected in December and that jobless claims climbed more than expected last week weighed on Wall Street.

"The question that has been haunting the market for some time is the underlying strength of the US economy. Although we have had some strong numbers recently, today's numbers were less than expected, disappointing the market," Quincy Krosby, chief market strategist for Prudential Securities, told Reuters.

In afternoon trading in New York, the Dow Jones Industrial Average fell 0.16 percent and the Standard & Poor's 500 Index edged 0.06 percent lower. The Nasdaq Composite Index bucked the trend, up 0.17 percent. Europe's Stoxx 600 Index closed 0.2 percent lower for the day.

Also weighing on the market was Chevron. The stock fell more than 2 percent after the second-biggest American oil company reported fourth-quarter profit was “significantly below” third-quarter results.

Today's data put a slight dent in the recent image of resilience in the world's largest economy.

US retail sales increased 0.1 percent in December, falling short of the 0.3 percent gain forecast in a Bloomberg survey of economists. Jobless claims rose 24,000 to 399,000 in the week ended January 7, compared with a median estimate of 375,000 in a Bloomberg survey.

"The labour market is improving but as seen today, the pace will continue to be extremely lumpy and possibly tenuous if Europe's recession deepens," Peter Boockvar, equity strategist at Miller Tabak & Co in New York, told Reuters.

However, the news from Europe today was positive by and large with successful debt auctions by Spain and Italy. Spain sold 10 billion euros of bonds, twice the target for the sale, while Italy sold 12 billion euros of bills, showing that the European Central Bank's efforts to boost liquidity are easing the strain of refinancing their debt.

The spread between the yields on Spanish and German benchmark bonds narrowed to about 339 basis points from more than 354 basis points at Wednesday's close, while the 10-year yield spread between Italian and German bonds fell below 500 basis points for the first time this year, according to Reuters.

"Basically the only reason this has been taken down so well is abundant ECB liquidity and with another one coming up in February, just for now the market seems very complacent," Michael Leister, strategist at DZ Bank in Frankfurt, told Reuters.

The euro got a lift, last up 0.9 percent against the greenback, after ECB president Mario Draghi said the bank had avoided a credit crunch and that there were signs the economy was stabilising. Europe's central bank kept its key interest rate at 1 percent.

“According to some recent survey indicators, there are tentative signs of stabilisation of economic activity at low levels,” Draghi said in Frankfurt.

In the UK, the Bank of England kept its benchmark interest rate at 0.5 percent and its asset-purchase plan at 275 billion pounds (US$422 billion).

“There are significant cross currents,” Michael Mullaney, who helps manage US$9.5 billion at Fiduciary Trust in Boston, told Bloomberg.

“Lower borrowing costs will help in the refinancing that’s due in the next few months in the euroland in general. Still, they’ve got to spur growth to get things going. In the US, today’s economic numbers were weaker than anticipated. The market has had a nice run here. Sentiment has gotten more bullish, which makes me nervous.”

(BusinessDesk)

We welcome your comments below. If you are not already registered, please register to comment.

Remember we welcome robust, respectful and insightful debate. We don't welcome abusive or defamatory comments and will de-register those repeatedly making such comments. Our current comment policy is here.

11 Comments

It doesn’t stop there. We are spiralling down fast - on many fronts.

Worldwide national debt levels are now so high, that infrastructure maintenance/ services are at risk. In some cases this will lead into frequently and massive failures of entire technological systems. The consequences will just add to the cycle of more costs and more debt, broken societies and more damage to environment, water, air and soil - our planet.

…and there is still majority of people including the government, who are advocating for growth – how stupid !

JEEBUS Friday the 13th.

Dear U.S.A.--your overdraft protection is about to be pulled.

Dear United States of America: We regret to inform you that your withdrawals exceeded your deposits last year by $1,600,000,000,000 ($1.6 trillion), including your "supplemental appropriations" spending.

Your account does have an overdraft protection, and so bonds were sold to cover your $1.6 trillion overdraft. While we value your business, we feel obligated to remind you that this is the third year that your overdraft protection exceeded 10% of your gross national product (GDP), and it seems your account is on course to register yet another $1.6 trillion overdraft in fiscal year 2012. 

 

So WHO acually bought the Spanish and Itailian bonds (and what with?)... wonder if it was Spanish and Italian banks being funded through the delightful new ECB money-go-round loans...? 

US retail sales rose less than expected in December ..... or to put it another way , the US consumer is saving more , deleveraging their debt .......

..... silly Gummy , put it that way , and the story becomes a good thing !

Mitt Romney a possible new leader of the USA:  http://www.webcasts.com/kingofbain/
Greedy, corrupt money obviously makes more political leaders – worldwide.
..and when you think - ohh those poor workers, I’m not one of them fooled by the system - think again and listen
http://www.youtube.com/watch?v=hYIC0eZYEtI
..............just too many sheep.

Romney to oust the Black Sheep from the White House , Walter ?
..
...... baaaaaaah !

Kunst, No more from you on the relationship between Japan and Christchurch Earthquakes recently....
There is likely one but the relationship might not be so simple as your first call. Don't give up! Sidereal influence maybe....
 
 

Pete – you are correct – the link has broken. Honshu coast had frequently earthquakes between 4.5 and 5.2, but luckily they didn’t occur in Christchurch afterwards as I predicted.

Kunst. your theory about Japan and CHC...The link hasn't broken, it just missed once or twice and now it's back....

Wow - after the economy and jobs, the federal deficit is among the top concerns mentioned by voters in polls.
 
http://www.bloomberg.com/news/2012-01-12/obama-sends-congress-notice-to-raise-federal-debt-ceiling.html
 
…..ohh well here are the jobs - at least some.
 
http://www.sfgate.com/cgi-bin/article.cgi?f=/c/a/2012/01/12/MNR11MOPB2.DTL
 

Days to the General Election: 24
See Party Policies here. Party Lists here.