Job market, factory data show weakness (Reuters)

WASHINGTON (Reuters) – New claims for jobless aid unexpectedly rose last week and factory activity along much of the Eastern seaboard contracted early this month, backing the view the Federal Reserve would move soon to boost growth.

However, industrial production edged higher in August and consumer prices rose more than expected, factors that could give U.S. central bankers some pause over putting in place aggressive new measures to help the economy.

Still smarting from the 2007-2009 recession, the U.S. economy barely grew in the first half of this year and a bruising spending battle in Congress spooked consumers into shutting their wallets last month. With growth limping along, the economy also looks very vulnerable to an escalation in Europe's debt crisis.

"Business activity has slowed and confidence has fallen ... but we haven't slipped into a recession yet," said Michelle Meyer, an economist at Bank of America Merrill Lynch in New York. "The Fed can still do some additional easing."

The number of Americans filing new claims for state unemployment aid rose unexpectedly to 428,000 in the week ended September 10, the Labor Department said on Thursday.

It was the second straight weekly increase and took initial claims to their highest level since the week ended June 25. Wall Street analysts expected a modest dip.

Despite the data, U.S. stocks rose and debt prices fell after a plan was offered by global central banks to reintroduce dollar liquidity into the strained European banking system.

Peter Kenny, managing director of Knight Capital in Jersey City, New Jersey, said much of the data was bad but not "apocalyptic," and other analysts agreed.

The Philadelphia Federal Reserve Bank said its business activity index registered minus 17.5 in September, an improvement from August but still pointing to contraction for the second straight month.

The New York Federal Reserve Bank said its manufacturing index for New York state fell to minus 8.82 in September -- its lowest level since November. It was the fourth straight month pointing to contraction.

FED TO THE RESCUE

The data could provide an added sense of urgency for Fed Chairman Ben Bernanke and his colleagues, who plan to take an extra day at their policy review next week to deliberate their options. Many economists expect the central bank to unveil new measures to lift growth when the meeting concludes on Wednesday.

Despite dim prospects of the nation's 9.1 percent unemployment rate coming down much any time soon, many Fed watchers expect a relatively modest step to try to bring down long-term interest rates without ramping up dollar printing.

The unexpectedly stiff reading on inflation could provide fodder for a lively central bank debate.

The Labor Department said in a separate report that its Consumer Price Index increased 0.4 percent last month after rising 0.5 percent in July. The reading was higher than analysts' forecasts, with food prices posting their biggest gain since March.

"It will make it more difficult for the Fed to talk about lower rates, even if the economy needs it," said Subodh Kumar, chief investment strategist at Subodh Kumar & Associates in Toronto.

Analysts now put the odds of a new U.S. recession at nearly one-in-three after recent reports showed no employment growth in August and a plunge in consumer confidence. Consumer spending ground to a halt in August as well.

The core price index -- which excludes food and energy -- rose 0.2 percent last month, in line with expectations and the same as in July. Both the headline and core year-on-year readings moved higher.

In its report on output at the nation's mines, factories and utilities, the Fed said manufacturing production rose 0.5 percent last month as auto production picked up. Utilities' output fell a sharp 3 percent as August was cooler following a bout of unusually hot weather in July. Mining output increased 1.2 percent.

(Additional reporting by David Lawder in Washington and Leah Schnurr and Gertrude Chavez-Dreyfuss in New York; Editing by Andrea Ricci)

View the original article here

PIMCO: Treasury market reflects likelihood of recession (Reuters)

NEW YORK (Reuters) – Bill Gross, manager of the world's largest bond fund, said on Friday the rally in Treasury yields to 60-year lows reflect a high probability of recession in the United States.

Gross, the co-chief investment officer at Pacific Investment Management Co., which oversees $1.2 trillion, also told Reuters Insider television it is apparent that policy options are limited.

"It is increasingly apparent to us that policy options are limited and that economic growth is slowing down," said Gross said. "There's no doubt that growth from the standpoint of employment or unemployment and growth from the standpoint of corporate profits is definitely a risk -- whether or not we see a positive 1 percent real GDP number I think is besides the point."

Gross said low Treasury yields are flashing recessionary conditions.

"They certainly reflect, in terms of their yields, not only a potential for a recession but the almost high probability of recession and the result of lowering inflation."

For more from the Interview, please click on http://insider.thomsonreuters.com/

(Reporting by Daniel Burns, Burton Frierson and Jennifer Ablan; Editing by Neil Stempleman)

View the original article here

Market rout deepens global economic crisis (Reuters)

BEIJING/SINGAPORE (Reuters) – The global economy stumbled deeper into crisis as stock markets slumped further on Tuesday, with investors losing confidence that the United States and Europe can rein in their debt burdens quickly and avert a double-dip recession.

Even as Asian equity markets pulled back from another day of staggering losses as they closed, European shares tumbled for an eighth session running, with news of an unexpected drop in British factory output in June highlighting the weakness of the economy.

The worsening market trauma has piled pressure on the U.S. Federal Reserve to announce fresh measures of support for the U.S. economy at a regular policy meeting on Tuesday, but analysts said its options are limited.

"You have got to a situation of capitulation and panic selling, and these things will keep running until we get some sort of policy response," said Peter Hickson, managing director of global commodity research at UBS.

"Even policy response these days seems to be impotent in terms of the market sentiment at the moment. The market is asking whether policymakers have many more bullets to fire."

Investors fear that, with confidence in the global economy's prospects evaporating, financial markets will remain in a slump, feeding a vicious circle of pessimism.

As of Monday, stock losses had wiped some $3.8 trillion from investor wealth globally in the recent rout as buyers rushing for perceived safety in the Japanese yen, the Swiss franc and gold, which hit another record high on Tuesday.

MSCI's all-country world index was down 1.2 percent, and has now shed about 20 percent since peaking in May. The market rule of thumb is that a fall of that magnitude constitutes a "bear market".

CHINA INFLATION DASHES STIMULUS HOPES

As the flight from risk continued in Asia and Europe on Tuesday, there was more bad news, this time from China, the stuttering global economy's main engine room.

Official data showed China's industrial output grew at a slower pace and its annual inflation rate unexpectedly quickened to 6.5 percent in July.

The inflation pressure puts the country's central bank in a bind as it tries to keep prices in check without dragging down an economy that already faces increasing threats from abroad.

It may not be in a position to reprise its 2008 role of lifting the global economy. When the Lehman Brothers bankruptcy triggered a worldwide slump, China implemented a stimulus package that helped buffer its own economy and buoy the world.

However, some analysts called on Beijing to act.

"It's time for Beijing to announce to the whole world that it will try to stimulate domestic demand again," said Tang Yunfei, an analyst with Founder Securities in the Chinese capital.

Global leaders have failed to reverse sliding markets since a blow was dealt to investor confidence by Standard and Poor's downgrade of the U.S. sovereign credit rating last week.

The downgrade heightened concerns that the twin-pronged crisis of a worsening euro-zone debt problem and a faltering U.S. economy raised the risks of a double-dip recession.

The European Central Bank (ECB) swept into the bond market to buy Italian and Spanish debt and sling a safety net under the euro zone's third- and fourth-largest economies on Monday. But bickering has persisted in Europe over a longer-term rescue plan.

In the United States, President Barack Obama called on Monday for urgent action on the U.S. budget deficit, but his proposal on taxes was promptly rebuffed by Republicans.

A pledge by G7 finance ministers and central banks on Sunday to provide extra cash if markets seize up has also provided little solace as their credibility wore thin.

"CREDIBILITY DEFICIT"

"Four years into the financial crisis, it is becoming increasingly clear that the biggest deficit is not in credit, but credibility," Harvard University economist Kenneth Rogoff wrote in the Financial Times.

"Markets can adjust to a downgrade of global growth, but they cannot cope with a spiraling loss of confidence in leadership and a growing sense that policymakers are disconnected from reality."

Major indexes in Asia slumped in early trade following a drop of more than 6 percent on Wall Street on Monday, and although some staged a sharp rebound, Hong Kong shares recorded their biggest one-day decline since the 2008 crisis.

European bourses put in a short-lived attempted at gains at the open, but succumbed to the bearish mood. The FTSEurofirst 300 index of top European shares lost ground for the eighth session in a row, hitting a two-year low.

"The speed and degree of deterioration in the situation is akin to what we saw during the failure of Lehman Bros, through the dot.com burst ... and during the 1982 recession," said Warren Hogan, chief economist at ANZ Banking Corp in Australia.

"We are looking at markets pricing for some sort of financial crisis. I think we are at a critical period now."

Concerns mounted that Asia would inevitably feel the cold wind of the West's slowdown.

"This is the first time in several years that all three major economic regions are feeling economic distress at the same time," said Keith Ducker, chief investment officer of Tora, a dark pool operator.

FOCUS ON THE FED

With U.S. stock index futures pointing to further steep losses for Wall Street on Tuesday, attention focused on a meeting due later of the Federal Open Market Committee as a possible prop for the market, though the Fed is expected to keep interest rates unchanged.

"Speculation is growing that Chairman Ben Bernanke may do more to help restore confidence with possibly another round of asset purchases," said Philippe Gijsels, head of research at BNP Paribas Fortis Global Markets, in Brussels.

On the political front, Obama said on Monday he hoped the loss of the prized AAA credit rating would add urgency to U.S. budget cutting plans.

He called for both tax hikes and cuts to welfare programs as part of the $1.5 trillion in deficit reduction that a special committee would deliver in late November, but Republican House Speaker John Boehner once again rejected the call, saying tax hikes were "simply the wrong approach."

Obama also spoke with the leaders of Italy and Spain, welcoming measures by their governments to address the economic turmoil in Europe.

Traders said the ECB was again seen buying Italian and Spanish debt on Tuesday after it agreed on Sunday to broaden its bond-buying program for the first time to halt an attack on the Mediterranean countries. Italian and Spanish yields declined sharply.

The ECB move was seen as only a temporary solution, however, due to the sheer size of Italy's bond market -- $1.6 trillion -- and there are doubts in the market it can be sustained.

(Editing by Lincoln Feast)

View the original article here

Euro zone policymakers fail to extinguish market fire (Reuters)

FRANKFURT (Reuters) – European policymakers tried to turn a more powerful fire hose on the euro zone debt crisis on Thursday but financial markets were unimpressed with their response.

The European Central Bank resumed buying government bonds after a four-month break and announced new longer-term funding for liquidity-starved banks. But after a brief hiccup, Italian and Spanish bond yields resumed the climb toward danger levels.

The executive European Commission urged holidaying euro zone leaders to consider swiftly boosting the size of their financial rescue fund, but was promptly rebuffed by the Germans and Dutch.

ECB President Jean-Claude Trichet said the central bank's controversial program of buying government paper in an effort to stabilize markets, inactive since March, was ongoing.

"You will see what we do," he told a news conference.

Traders duly saw the ECB enter the market as Trichet spoke but an EU monetary source said purchases were limited to Irish and Portuguese bonds and there were no plans to buy bonds of other nations.

Spanish and Italian 10-year bond yields, which had fallen in anticipation of ECB action, rose again in volatile trading and safe haven German Bund futures jumped.

Traders said they were not convinced the bond-buying would be effective in stopping contagion to the euro area's third and fourth largest economies.

"The ECB may have missed an opportunity to act more convincingly. The key now is to see whether and in which size the ECB actually intervenes in the Spanish and Italian bond markets," economist Holger Schmieding of Berenberg Bank said.

Trichet acknowledged the decision was not unanimous, but an "overwhelming majority" supported it. That revived memories of a damaging split on the governing council last year, when then German Bundesbank chief Axel Weber publicly opposed the policy.

It also raised questions about whether the ECB was waiting for Rome and Madrid to take extra fiscal adjustment measures before it will buy their bonds, or whether the central bank was unable to agree on widening the scope of bond-buying to them.

Trichet said the central bank would conduct a special six-month liquidity operation and keep providing unlimited short-term funds to banks at least until next January.

Several banks in Greece, Portugal and Ireland remain totally shut out of market funding and some Spanish and Italian lenders are also dependent on ECB funds.

European Commission President Jose Manuel Barroso said in a letter to EU leaders: "I... urge a rapid re-assessment of all elements related to the EFSF, and concomitantly the ESM, in order to ensure that they are equipped with the means for dealing with contagious risk."

In a quick put-down, a finance ministry spokesman in EU paymaster Germany said it was unclear how re-opening the debate about financial backstops so soon after last month's emergency summit could help calm markets.

The Dutch Finance Ministry also said the focus should be on implementing the summit decisions not reopening the discussion.

CURRENCY TENSIONS

The European Financial Stability Facility, which has bailed out Ireland and Portugal and will run a planned second package for Greece, has a maximum capacity of 440 billion euros. It will be replaced in 2013 by a 500 billion euro permanent European Stability Mechanism.

The 17 euro zone leaders left the size unchanged when they agreed on July 21 to widen the funds' role to buying bonds in the secondary market and providing precautionary credit lines to states under pressure on credit markets.

Market analysts and economists say the EFSF would need to be at least doubled and perhaps trebled to pre-empt attacks on larger economies such as Italy and Spain.

Madrid sold 3.3 billion euros ($3.14 billion) in short-term bonds earlier on Thursday but had to pay a sharply higher borrowing cost.

Across the globe, Japanese authorities acted to weaken a strong yen, joining Switzerland in efforts to tame currencies buoyed by safe-haven demand from investors fretting about the health of the global economy and the euro zone's debt woes.

Trichet said those moves were not part of any concerted multilateral policy approach.

Italian Economy Minister Giulio Tremonti voiced frustration at the pace of the ECB response to a selloff of Italian stocks and bonds over the last three weeks.

"I note that the Bank of Japan today launched quantitative easing and the Swiss central bank cut rates to zero. We are waiting for (ECB) decisions if possible, but desirable," he said.

Tremonti said when he talked to Asian investors, they said: "If your central bank doesn't buy your bonds, why should we buy them?"

Asked whether Italy was taking adequate steps to strengthen its public finances, Trichet said it was necessary to frontload structural measures. A 48 billion euro austerity program passed by parliament last month delays the brunt of spending cuts until after a 2013 general election.

The chief European economist of credit ratings agency Standard & Poor's said only the ECB could act swiftly to stabilize battered euro zone sovereigns.

"Markets are still moving so we need someone to intervene," S&P's Jean-Michel Six said. "The only effective fireman capable of rushing out of the fire station at top speed is the European Central Bank, which has played an admirable role since the start of the crisis to calm markets."

He told France-Inter radio that until a contagion-fighting plan adopted by euro zone leaders last month came into effect, which requires parliamentary approval in some countries, the ECB had to play an interim role.

There is strong opposition to the bond-buying policy among guardians of central banking orthodoxy in Germany who argue it compromises the core mission of fighting inflation. German Bundesbank president Jens Weidmann broke off his holiday to attend Thursday's ECB policy-setting meeting.

The ECB bought 76 billion euros of sovereign bonds, believed to be only Greek, Irish and Portuguese, to stabilize markets last year but critics said the Securities Market Program had only limited, short-term impact and did not prevent any of those countries requiring EU/IMF bailouts.

JITTERS ABOUT FRANCE

Japan sold one trillion yen ($12.6 billion) and its central bank eased monetary policy on Thursday to try to push down the yen against the dollar and euro. [ID:nL3E7J409F]

Economy Minister Kaoru Yosano said policymakers of major economies needed to discuss currencies at either Group of Seven or Group of 20 level -- the first official call for multilateral action since twin crises over U.S. and euro zone debt became acute last month.

Official sources in several G7 countries said on Wednesday they were not aware of any move so far to involve the G7 or G20, but that France, which holds the chair of both groups this year, might consult those forums if the turmoil persists.

In addition to Italy and Spain, some investors are becoming jittery about the finances of France, the euro zone's second biggest economy. The spread of 10-year French government bonds above German Bunds hit a euro lifetime high of 0.81 percentage point on Wednesday.

Any major expansion of the euro zone bailout fund would put a greater financial burden on Paris, the second largest contributor to the fund, and could push up its yields further.

In another pointer to spreading concern, Britain's Financial Services Authority has asked UK banks to detail their exposure to Belgian sovereign debt, adding it to a list of countries with debt problems including Portugal, Ireland, Italy, Greece and Spain, the finance director of Lloyds bank said.

(Additional reporting by Sophie Louet in Paris, Marius Zaharia in London, Stanley White and Leika Kihara in Tokyo, Claire Sibonney in Toronto; Writing by Paul Taylor, editing by Mike Peacock/Janet McBride)

View the original article here

How to make money from the Android Market

How to make money from Android Market is a New CB product in a completely New niche! Huge Conversion in the fastest growing apps market on Earth. High quality e-book, secure happy customers and no refunds! A must have for all affiliates!

Check it out!

Midwest factories roar, but labor market weak (Reuters)

WASHINGTON (Reuters) – Factory activity in the U.S. Midwest accelerated in June, fostering hopes for a pick-up in economic growth in the third quarter, despite signs of lingering weakness in the labor market.

The Institute for Supply Management-Chicago said on Thursday that its business barometer rose to 61.1 after slowing abruptly to 56.6 in May. The gain defied economists' expectations for a drop to 54.

The sturdy factory activity in the automotive-heavy region snapped a string of weak regional manufacturing surveys and raised optimism the economy may start to emerge from the soft patch it became stuck in the first half of the year.

"This may be an indication that we are at least at the bottom of this slowdown, not only in manufacturing but also economic," said Millan Mulraine, senior Macro Strategist at TD Securities in New York. "In the months ahead we are likely to see a resurgence in growth."

But optimism was tempered somewhat by a separate report from the Labor Department showing initial claims for state unemployment benefits slipped just 1,000 to 428,000 last week. Economists had expected claims to drop to 420,000.

It was the 12th straight week that claims have been above 400,000, a sign the labor market has stagnated. Employment stumbled badly in May, with employers adding just 54,000 jobs -- the fewest in eight months.

The economy has been slammed by high gasoline prices and supply chain disruptions in the auto sector after the March earthquake in Japan.

Many economists and the Federal Reserve, which ends its latest round of monetary stimulus on Thursday, have always maintained the obstacles to growth in the first six months of the year were temporary.

Some analysts had begun to speculate the Fed might be forced to offer further stimulus given signs of economic weakness, but Thursday's data suggested its forecast was on track.

The brightening manufacturing picture was also enhanced by a Kansas City Fed survey that showed factory production in its region rebounded strongly this month after slumping in May.

The bullish reports raised the possibility that Friday's Institute for Supply Management survey for June could show unexpected strength. National factory activity had been expected to cool.

"We look for the ISM manufacturing index to move lower again in June. Given the stronger-than-expected Chicago PMI reading, the risks are slightly to the upside," said Yelena Shulyatyeva, an economist at BNP Paribas in New York.

The relatively strong factory data helped stocks on Wall Street to rise for a fourth straight day. Prices for U.S. government debt fell and the dollar weakened against a basket of currencies.

JAPAN ON THE MEND

Details of the Chicago PMI survey were generally upbeat, with new orders and production rising. The employment index was lower but it still indicated expansion.

A shortage of parts from Japan has forced some U.S. automakers to bring forward their summer annual plant shutdowns, which may have helped to keep jobless claims elevated. Automakers normally shut down for retooling in July.

"We think in July definitely we will start to see the (claims) number drift back down," said Brett Ryan, an economist with Deutsche Bank in New York. "We do think from anecdotal evidence from Toyota and other automakers that hiring will go up in July."

Japanese factory output jumped by the most in almost 60 years in May, data showed on Wednesday, as manufacturers restored supply chains damaged by the earthquake.

Data on business lending on Thursday also offered hope the economy is poised to pick up in coming months.

The Thomson Reuters/PayNet Small Business Lending Index, which measures the overall volume of financing to U.S. small businesses, rose a record 26 percent in May from a year earlier to its highest since July 2008.

(Additional reporting by Ann Saphir in Chicago; Editing by Andrea Ricci)

View the original article here