The number of people seeking US unemployment benefits rose 68,000 last week to a seasonally adjusted 368,000.]]> |||
Washington - The number of people seeking US unemployment benefits rose 68,000 last week to a seasonally adjusted 368,000, the largest increase in more than a year.
The surge in first-time applications could be a troubling sign if it lasts.
But it likely reflects the difficulty adjusting for delays after the late November Thanksgiving holiday.
The Labor Department said Thursday that the less volatile four-week average rose 6,000 to 328,750. That is close to pre-recession levels and generally a positive sign for job gains.
Applications had tumbled in recent weeks to nearly six-year lows, partly because of a late Thanksgiving holiday that may have distorted the government's seasonal adjustments.
Economists believe this week's jump in claims was a dose of payback.
“What the seasonals give in one month they have to take back the next, hence today's number,” said Ian Shepherdson, chief economist at Pantheon Macroeconomics.
Applications for unemployment aid are a proxy for layoffs.
A steady decline over the past year suggests that fewer Americans have lost their jobs.
Economists will track the next few weeks closely to see if that trend is reversing, or if the surge is a temporary blip caused by seasonal adjustments.
The recent drop in layoffs has coincided with a pickup in hiring.
The economy has added an average of 204,000 jobs a month from August through November, up from an average of 146,000 in May through July.
Employers added 203,000 jobs last month and the unemployment rate dropped to a five-year low of 7 percent, the government said Friday.
Four straight months of robust hiring have raised hopes that 2014 will be the year the economy returns to normal.
As more Americans draw a paycheck, incomes and consumer spending generally increase.
About 70 percent of economic activity comes from consumer spending.
However, the unemployment rate remains above the historic averages of 5 percent to 6 percent that are associated strong job markets.
A healthier job market could make the Federal Reserve scale back its extraordinary economic stimulus programs.
The Fed has been buying $85 billion in bonds each month to keep long-term interest rates low and encourage borrowing and spending.
More than 3.8 million people collected some form of unemployment benefits in the last full week of November.
However, 1.25 million of them could soon lose those benefits.
They received aid under a special federal program for the long-term unemployed that is set to expire on December 28.
The program extends aid that usually expires after six months for an additional 28 weeks.
Congressional leaders have proposed a budget deal that would not preserve the additional benefits, meaning that as many as 2.1 million Americans will lose this assistance by March. - Sapa-AP]]>
European shares fell for the third day in a row on persistent uncertainty over when the United States may scale back economic stimulus measures.]]> |||
London - European shares fell for the third day in a row on persistent uncertainty over when the United States may scale back economic stimulus measures, and carmaker Peugeot dropped more than 10 percent.
Several traders said that while they saw European stock markets making little headway before the US Federal Reserve's meeting next week, they did expect some recovery towards the end of 2013 and into 2014.
The pan-European FTSEurofirst 300 index, which fell 0.7 percent on Wednesday, declined by a further 0.74 percent to 1,246.98 points by 14:02 SA time.
Data showing a surprise fall in euro zone October industrial output also put pressure on shares.
French carmaker Peugeot slumped more than 10 percent after news of a writedown and that it was considering a capital increase.
The FTSEurofirst 300 index has retreated about 5 percent after climbing to a 5-year high last month, although the index remains up by about 10 percent since the start of 2013.
The prospect that the Fed may start to taper its “quantitative easing” (QE) programme this month has led some investors to sell off equities to book profits on the rally so far this year.
Scott Meech, co-head of European equities at Union Bancaire Privee, said uncertainty over QE may prevent equities making much further progress this year.
He advised avoiding European shares which are heavily exposed to emerging markets as speculation was leaning towards the Fed starting to taper soon.
“I would choose domestically focused European companies in the coming months and avoid those with emerging market exposure,” he said.
TIME TO BUY ON THE DIP?
The US tapering situation has led to a pick-up in US bond yields, which in turn has lifted the US dollar and hit emerging markets currencies and stocks.
Meech said that even if European stock markets lost ground in December, they would then recover and rise further in 2014 as a gradual recovery in the broader European economy buoys the region's stock markets.
Tim Gregory, chief investment officer at Psigma Investment Management, also said he would use any weakness in the global equity markets over the coming week to buy.
“We think there is a chance that Fed tapering will begin next week. However, whether it is December, January or March is less important than the fact that the Fed feels able to make a start on withdrawing QE,” said Gregory.
“Equities remain our asset class of choice on a five-year view so we would prefer to adopt a strategy of buying dips over selling rallies,” he said. - Reuters]]>
Britain's FTSE 100 fell, heading for its longest run of weekly drops since 2008.]]> |||
London - Britain's FTSE 100 fell on Thursday, heading for its longest run of weekly drops since 2008 led by a sell-off in engineering and retail and rattled by growing concerns of an imminent scaling back of US stimulus.
Sports Direct led the fallers, down 8.2 percent after disappointing investors with a slightly smaller than expected underlying pre-tax profit in the first half.
The absence of any outlook upgrades also weighed on Britain's biggest sporting goods retailer.
The news hit Sports Direct shares which had been among the most expensive in the FTSE 100 - trading on 30 times current earnings, compared with the index average of around 16 times.
“You normally get ratings of that kind when you are expecting further upgrades,” said Paul Kavanagh, partner at Killik & Co.
“Because you've got a pretty weak market anyway, there is scope for a reaction. It's not just Sports Direct - Supergroup, Ted Baker, all those highly-rated retail concepts have been hit by the feeling that valuations may have got a little bit stretched in the near term.”
Shares in mid-cap Supergroup, which also issued an update on Thursday, and Ted Baker fell 2.9 and 2.2 percent respectively.
In the engineering sector, a profit warning from mid-cap Wood Group hit blue-chip peers like Amec and Petrofac.
“That whole sector is really suffering ... The big oil companies are starting to focus back on their return on equity and reducing capex in certain areas, so ... the people that are suffering are those that feed off those big companies,” said Kavanagh at Killik.
“When Wood Group are guiding 15 percent lower, there is scope for further earnings disappointment in the sector.”
Shares in Wood Group dropped 10.7 percent, the top faller in the mid-cap FTSE 250, while Amec and Petrofac were down 4.9 and 5.0 percent respectively.
The weakness in engineers and retailers meant the FTSE 100 lagged its European peers, with the British index down 63.36 points or 1.0 percent at 6,444.36 points by 14:02 SA time while the euro zone EuroSTOXX 50 lost 0.5 percent.
Sentiment, however, was negative across the board, hit by growing expectations that the US Federal Reserve may start to scale back its equity-friendly stimulus at this month's meeting.
“(The market) thinks they're going to taper next week; the mood seems to have changed on that quite dramatically,” said Ian Williams, equity strategist at Peel Hunt.
The shift in sentiment has helped take the FTSE's drop for the week so far to 1.6 percent, putting it on track for a sixth consecutive weekly drop for the first time since summer 2008.
The British benchmark - whose companies make around a quarter of their revenues in the United States - has been worse hit than indexes with lower US exposure, such as the German DAX or the French CAC.
The recent weakness of the FTSE has also been exacerbated by the pound, which hit a 2-year high against the dollar this week, eating into the revenues of British exporters.
“FTSE is continuing to struggle to maintain the 6,500 level and this will most likely remain the case as long as sterling stays this strong, which is a significant headwind for the export-led part of the economy,” said Lex van Dam, hedge fund manager at Hampstead Capital. - Reuters]]>
Global equities slipped to a one-month low after a provisional budget deal in Washington prompted speculation the Federal Reserve policymakers will start trimming its stimulus as early as next week.]]> |||
London - Global equities slipped to a one-month low on Thursday after a provisional budget deal in Washington prompted speculation the Federal Reserve policymakers will start trimming its stimulus as early as next week.
“The chances of them doing something next week are certainly rising,” said Paul Kavanagh, a partner at Killik.
US data releases were being watched for clues on the strength of the economy, since greater strength means the Fed can act with less risk of curtailing economic growth.
Key releases on Thursday included first-time jobless claims for the week ended December 7 and retail sales for November.
This week's budget pact eased some of the fiscal drag on the US economy and improved the chances the Fed's will scale back its bond-buying operations at the December 17-18 meeting.
The stimulus programme has helped equities to hit multi-year highs.
“There have been reasonable gains this year for long-only investors,” Kavanagh said.
“And what (Fed policymakers) probably don't want to see is too much volatility or certainly too much downside, and I suspect there are moves to try and protect the returns at the moment.”
The MSCI world equity index, which tracks shares in 45 countries, fell 0.4 percent to a one-month low by 14:20 SA time, while the pan-European FTSEurofirst 300 extended losses to hit a new two-month low after a surprise fall in the euro zone's industrial output in October.
The index was last down 0.7 percent at 1,247.42 points.
It is still up about 10 percent in 2013, but has fallen 5 percent since climbing to a five-year high last month on lingering concerns the Fed's accommodative policies might not last longer.
“We think there is a chance that Fed tapering will begin next week. Recent GDP data, ISM manufacturing data and the jobs report all lend support to tapering sooner rather than later,” said Tim Gregory, chief investment officer at Psigma Investment Management, said.
“However, whether it is December, January or March is less important than the fact that the Fed feels able to make a start on withdrawing.”
A note of caution was added after a source said ex-Bank of Israel governor Stanley Fischer had been asked to be the Fed's next vice chair. Fischer is considered less dovish than Janet Yellen, the nominee to lead the Fed.
European stocks tracked weaker overseas markets. MSCI's broadest index of Asia-Pacific shares outside Japan fell 0.8 percent on Thursday and US shares earlier closed 0.8 to 1.4 percent lower.
ITALIAN, SPANISH BONDS SLIP
Italian and Spanish bonds fell after a media report said the European Central Bank could make euro zone banks hold capital against sovereign bonds, to keep weak lenders from using its cash to buy up debt from crisis-hit countries.
The Financial Times quoted European Central Bank executive board member Peter Praet as saying the bank could combine its new powers as chief banking regulator with its existing role as currency issuer to toughen up requirements on sovereign bonds.
“The ECB and in particular the Bundesbank is worried about the amount of sovereign bonds that Italian and Spanish banks have taken on their balance sheets,” said RIA Capital Markets strategist Nick Stamenkovic.
A trader said if the ECB decided to introduce such rules, it was going to happen gradually over a period of time.
It was not a big reason to sell, he said, but some investors had decided to book profits after the report.
However, ECB President Mario Draghi said it would not unilaterally assign risk weightings to the various euro zone government bonds on banks' balance sheets and the issue should be agreed on globally.
In Slovenia, 10-year yields fell to their lowest level in nearly nine months after the results of bank stress tests matched what the government said it could afford without seeking an international bailout.
In the currency market, the euro hovered near a two-year high against the dollar and a five-year peak versus the yen, helped by higher short-term market rates and year-end repatriation by European banks shoring up balance sheets.
Among commodities, copper and nickel climbed to five-week peaks on fears that a planned Indonesian ban on ore exports next month could crimp exports from the world's fifth-biggest copper mine and nickel suppliers.
However, gold, which is down 25 percent this year, slid on fresh speculation about the Fed's likely move.
Ultra-loose monetary policy is generally bullion-friendly, since it keeps interest rates low and raises inflation fears. - Reuters]]>
US retail sales rose solidly in November as Americans bought automobiles and a range of other goods.]]> |||
Washington - US retail sales rose solidly in November as Americans bought automobiles and a range of other goods, adding to signs of a strengthening economy that could draw the Federal Reserve closer to reducing the pace of monetary stimulus.
The Commerce Department said on Thursday retail sales increased 0.7 percent last month after rising by a revised 0.6 percent in October.
November's retail sales increase was the largest in five months.
Economists polled by Reuters had forecast retail sales, which account for about 30 percent of consumer spending, advancing 0.6 percent after a previously reported 0.4 percent gain in October.
So-called core sales, which strip out automobiles, food services, gasoline and building materials and correspond most closely with the consumer spending component of gross domestic product, increased 0.5 percent after rising 0.7 percent in October.
That suggested consumer spending would likely step up from a two-year low touched in the third quarter.
Spending is being supported by solid employment gains and steady income increases, which could help limit the drag from inventories on fourth-quarter GDP growth.
Lower gasoline prices are also helping, though they are a drag on retail sales figures.
The steady stream of fairly upbeat data should give the Fed confidence to start cutting back its monthly $85 billion bond buying program at least by March.
Retail sales last month were buoyed by a 1.8 percent jump in receipts at auto and parts dealers.
That helped to offset a 1.1 percent drop in sales at gasoline stations.
Receipts at building materials and garden equipment stores rebounded 1.8 percent after falling 1.5 percent in October.
There were also gains in receipts at furniture, electronics and sporting goods shops, among others.
Sales at electronics and appliance stores rose 1.1 percent, while furniture store sales rose 1.2 percent.
However, receipts at clothing stores fell 0.2 percent after rising 2.6 percent in October. - Reuters]]>
Euro zone industrial output fell at its steepest monthly rate in more than a year in October.]]> |||
Brussels - Euro zone industrial output fell at its steepest monthly rate in more than a year in October, highlighting the fragility of the bloc's economic recovery and supporting the case for further central bank stimulus.
The 9.5 trillion euro ($13.1 trillion) regional economy emerged from recession in the second quarter but growth almost ground to a halt again in the third, and the outlook is clouded by record high unemployment, and weak consumer and business confidence.
Industrial production in the 17 countries using the single currency dropped 1.1 percent on the month, its biggest monthly decline since September 2012, Thursday's data from EU statistics agency Eurostat showed.
Analysts polled last week by Reuters had expected a 0.3 percent rise after a revised 0.2 percent drop in September.
Data showing a 1.2 percent drop in industrial output in the region's dominant economy Germany was released on Monday.
“All in all, today's industrial production figures clearly highlight the bumpy and fragile nature of the euro zone's economic recovery,” said Martin van Vliet, an economist at ING.
“With euro zone growth seemingly stuck in low gear disinflationary pressures will persist, thereby keeping the possibility of further ECB action very much alive.”
The European Central Bank cut interest rates to a record low of 0.25 percent in November in reaction a sharp fall in inflation and the weak recovery, with the bank saying it stood ready for further action to shield the rebound and keep inflation on projected path.
A spokeswoman for the EU executive, the European Commission, said a variety of indicators needed to be taken into account when assessing the state of the economy, which it remained confident was at “(the) beginning of a solid recovery”.
Year on year, output rose 0.2 percent in October.
IRISH OUTPUT TUMBLES
The monthly production fall was led by a 4.0 percent drop in highly volatile energy output, followed by a 2.4 percent decline in production of durable goods including cars and electronics.
Capital goods production fell 1.3 percent.
European refinery output in October dropped 6 percent on the year and was down by 7.9 percent on the month as refiners traditionally conduct routine maintenance in the third quarter, and weak profit margins pushed many to cut crude processing rates for economic reasons this year as well.
Output in the euro zone's second biggest economy France dropped by 0.3 percent on the month for a second consecutive month.
Ireland, which is exiting an international financial bailout, saw production plummet 11.6 percent on the month, the worst performance since September last year. - Reuters]]>
Britain has more at stake than many other countries from a relaxation of Chinese capital controls, according to a Bank of England study.]]> |||
London - Britain has more at stake than many other countries from a relaxation of Chinese capital controls and must be ready to cope with a tidal wave of renminbi flows over the next decade, according to a Bank of England study.
The paper suggests that China's external assets and liabilities could jump from less than 5 percent of global GDP today to more than 30 percent by 2025.
“If China does liberalise, few other events over the next decade are likely to have more impact,” said John Hooley, author of the paper entitled “Bringing down the Great Wall? Global implications of capital account liberalisation in China”.
Britain's large and open financial system, combined with its fast-growing financial ties with China, means it is likely to be particularly affected by the expected further opening up of the Asian powerhouse to global financial markets.
Potential benefits include faster economic growth and more liquid capital markets but there is the risk that asset prices could inflate too quickly, the paper said.
“A rapid increase in liquidity from China could lead to absorption pressures in some asset markets in the short run, which could lead to a mispricing of risk with adverse consequences for financial stability,” it says.
Citing examples where liberalisation brought instability - such as in Eastern Europe where large capital inflows contributed to a credit crisis in 2008 - the report warns that China will need to sequence its opening up to foreign financial markets with policies to curb excessive domestic credit growth.
“The potential changes in both the magnitude and composition of capital flows would dramatically alter the financial landscape in both China and globally,” it concludes.
Britain's government is seeking to position London as the main centre outside of Asia for trading and transacting in the Chinese currency.
In October, the BoE's Prudential Regulation Authority made it easier for banks from China and other countries to open new branches in Britain. In June the Bank of England established a currency swap facility with China, supporting yuan users by providing liquidity when needed.
“Given that Chinese capital account liberalisation could lead to dramatic changes in the global financial landscape, policymakers will be facing uncharted territory,” the BoE report said.
“To succeed, policy co-operation between national authorities is likely to be necessary, both to increase understanding of the risks and to develop common policy approaches.” - Reuters]]>
Global airline profits will total $12.9 billion in 2013 and a record $19.7 billion next year due to lower jet fuel costs and improved efficiency, the International Air Transport Association (IATA) said.]]> |||
Geneva - Global airline profits will total $12.9 billion in 2013 and a record $19.7 billion next year due to lower jet fuel costs and improved efficiency, the International Air Transport Association (IATA) said on Thursday.
The widely-watched forecasts are higher than IATA had expected in its last update in September, when it predicted profits of $11.7 billion for 2013 and $16.4 billion in 2014.
However, cargo demand remains stagnant, IATA said.
“2013 will see passenger numbers top 3 billion for the first time, increasing to 3.3 billion in 2014,” IATA Director General Tony Tyler told a news conference. - Reuters]]>
Shares of South African gold producers slide as global risk aversion mounts on market perceptions the US Federal Reserve could start trimming its stimulus programme next week.]]> |||
Johannesburg - Shares of South African gold producers slide as global risk aversion mounts on market perceptions the US Federal Reserve could start trimming its stimulus programme next week.
Johannesburg's Gold Mining Index is down 5.55 percent to 1,038.73 at 12:15 SA time.
The index has lost over half its value this year.
Sibanye Gold is down almost 7.5 percent and AngloGold Ashanti, Africa's biggest bullion producer, is 6 percent lower at 123.51 rand.
“It's a risk-aversion or risk-off trade now and so all of the cyclical stocks like gold are getting whacked,” says Abri du Plessis, Chief Investment Officer at Gryphon Asset Management.
Bullion's spot price is steady around $1,245 an ounce but analysts attribute this to technical factors. - Reuters]]>
Anglo American told investors that its turnaround was “basic” but would take years, with no big sell-off of assets.]]> |||
London - Anglo American told investors on Thursday that its turnaround was “basic” but would take years, with no big sell-off of assets in the short term and headwinds continuing into 2014 as the company overhauls the performance of key mines.
Expectations have been high for Mark Cutifani, the Australian former boss of bullion miner AngloGold who took the helm at Anglo American earlier this year.
In July, he branded the group's performance to date as “unacceptably poor”.
But he stopped short of dramatic announcements on Thursday, a day of presentations intended to flesh out the group's strategy - warning that even the “half a dozen” assets earmarked for potential sale would be improved before a decision is made.
“It is basic stuff, it can be delivered,” Cutifani said of the company's blueprint to boost performance, a mostly operational plan which it says will see benefits flowing through largely in 2015 and 2016.
Analysts and investors have long speculated on the future of Anglo assets, including its troubled Anglo American Platinum unit and a majority stake in diamond miner De Beers.
“Longer term, or even medium to longer term, all options remain on the table,” Cutifani said ahead of presentations to investors.
“We have a bit of work to do and then we can decide whether these assets fit into the portfolio... what we won't do is go out there and sell assets for the sake of selling them.”
Cutifani said Anglo's key target of hitting a return on capital employed (ROCE)- a measure of the value a company gets out of its assets - of more than 15 percent by 2016 was calculated without including asset sales.
Instead, the necessary lift of at least $3.5 billion to operating profit would come from operational improvements.
Anglo, the smallest of the leading diversified miners, has long lagged behind its peers.
In the past two years alone it has been hit by labour troubles in South Africa, operational hiccups at copper mines and multibillion-dollar cost overruns in Brazil.
Some analysts had expected a change to targets for the troubled Brazilian iron ore project, Minas Rio, but Anglo confirmed both the cost - $8.8 billion - and the target of putting the first ore on ships at the end of next year.
Cutifani said progress at Minas Rio meant the group was “playing hard to get” in talks with potential partners, though it remained open to selling a minority stake in the operation.
Anglo also outlined changes at its key Sishen mine, the heart of Kumba Iron Ore, where it said new mining plans would help it return to production capacity by 2016.
In its pipeline of projects, where Anglo has vowed to make cuts, the miner said it was reviewing its Quellaveco copper project in Peru, which had been due to come before the board for approval this year.
That is delayed until 2015. - Reuters]]>