08/12/08

In economic news, employers cut 533,000 jobs from their payrolls in November, the biggest monthly decline since 1974, and far more than the 325,000 cut that Wall Street economists were expecting. Meanwhile, September’s and October's job losses were revised up, bringing the three month decline to 1.3m, the largest three month job loss total since World War 2. So far this year, 1.9m jobs have been lost, topping the 1.6m lost in the 2001 recession. In other news, a record 1.35m homes were in foreclosure in the third quarter, up 76 percent from a year ago.

Executives from Detroit's Big Three automakers were back on Capitol Hill Friday, asking a House panel for a massive loan package to rescue their struggling businesses. Executives from GM, Ford Motor and Chrysler testified before the Senate Thursday. The Big Three are seeking $34bn in aid to rescue their struggling industry, up from an initial request of $25bn last month. Separately, GM, said Friday it will lay off about 2000 workers in the first quarter of next year.

Shares of Hartford Financial Group surged more than 102 percent after the insurer boosted its 2008 profit forecast and said that it has enough capital to get through further declines in the stock market. The stock has plunged 92 percent this year, as of the previous session’s close, on worries that the company would run out of cash.

Merrill Lynch rallied after shareholders on Friday approved Bank of America's $21bn purchase of the bank. The all stock deal, initially at $50bn when announced in September, but had been revised lower after Bank of America's stock fell.

Treasury prices slumped, raising the yield on the 10 year note to 2.7 percent from 2.56 percent late Thursday. The 10 year yield dropped below 3 percent last week for the first time since the note was first issued in 1962. The yield on the 3 month Treasury bill fell to 0.01 percent from 0.015 percent Thursday, near the 68 year low of zero hit last month.

Lending rates showed little improvement. The 3 month Libor rate held steady at 2.19 percent unchanged from Thursday. The overnight Libor fell to 0.28 percent from 0.52 percent Thursday.

US light crude for January delivery fell $2.86 to settle at $40.81 a barrel on NYMEX, ending at a four year low.

COMEX gold for February delivery lost $13.30 to settle at $752.20 an ounce.

Gasoline continued its fall to nearly four year lows, with prices down 1.6 cents to a national average of $1.773 a gallon.

The dollar gained versus the euro and the yen.

The Nikkei average climbed 5.2 percent today to its highest close in a week, with machinery stocks such as Komatsu surging on hopes for economic stimulus packages being enacted around the world. Aegon Co shot up 6.2 percent after two company sources said on Saturday that Mitsubishi Corp plans to buy a 5 percent stake in the company for more than $324m, and the two will tie up an overseas procurement amid the economic downturn.

The widespread buying was supported by spillover energy from strong gains in other Asian markets, with the MSCI index of Asia-Pacific stocks outside Japan surging 6.3 percent, despite Friday data showing over half a million US jobs were lost in November, the most in 34 years. The Nikkei average closed 411.54 points higher at 8329.05.

UK stocks closed lower on Friday, with energy stocks and miners the heaviest losers as the unemployment figures highlighted the bleak demand outlook for commodities. The FTSE100 closed 114.24 points lower at 4049.37, having closed down 0.2 percent Thursday.

Heavyweight energy stocks weighed most on the index, as crude prices slid to below $42 to their lowest level since January 2005, after data showing the US economy shed more than half a million jobs in November. BP fell 6.6 percent, BG Group lost 7.4 percent and Royal Dutch Shell fell 6 percent.

The weak US data intensified speculation that the Bank of England may ease monetary policy further, having cut interest rates by a full percentage point to two percent on Thursday. Miners also suffered following a dip in base metals prices, with copper hitting a 3 1/2 year low. Lonmin was the FTSE's heaviest loser falling 16.2 percent, while BHP Billiton, Vedanta Resources, Antofagasta, Kazakhymys and Xstrata fell between 4.3 and 9.4 percent.

Banks were generally softer, with the FTSE banks index down 1.7 percent as worries about the state of the UK economy and housing market weighed on the troubled sector. RBS, HBOS and Lloyds TSB fell between 6 and 7.7 percent. But HSBC gained 0.1 percent and Standard Chartered gained 1.1 percent. 3i Group fell 4.5 percent, after it said it was to reduce its headcount by about 15 percent in response to toughening market conditions.