Stocks managed to stage a strong rebound on Thursday. Bloomberg reports:
U.S. stocks surged, reversing most of yesterday’s plunge, and Treasuries sank as an unexpected drop in jobless claims and higher-than-estimated earnings tempered concern the economy is slowing as Europe’s debt crisis widens. The Swiss franc slid on plans to temporarily peg it to the euro.
The Standard & Poor’s 500 Index jumped 4.6 percent to 1,172.64 at 4 p.m. in New York. The Stoxx Europe 600 Index rallied 3.2 percent, rebounding from a two-year low. Treasuries extended losses as demand weakened at an auction of 30-year bonds, sending the benchmark 10-year note yield up 22 basis points to 2.32 percent. The franc slid at least 4.8 percent against all 16 major peers. Gold retreated from a record above $1,800 an ounce, while zinc and lead rallied...
U.S. equity futures erased losses before markets opened today after first-time applications for jobless benefits decreased 7,000 in the week ended Aug. 6 to 395,000, the fewest since early April. Economists forecast 405,000 claims, according to the median estimate in a Bloomberg News survey. The Labor Department said the number of people on unemployment benefit rolls and those getting extended payments also dropped.
However, the situation in Europe remains a source of concern. From Reuters:
Fears about the health of French banks intensified the scramble for U.S. dollars on Thursday and drove up European banks' borrowing costs to levels not seen since the 2007-2009 global credit crisis...
In the repo market, sources at two big Wall Street firms said they raised their rates for some European banks, but are not cutting them off. Money market funds have been reducing exposure to French banks as well.
Meanwhile, French and other European banks lined up at the European Central Bank and borrowed more than 4 billion euros in emergency overnight cash, the highest amount since mid-May.
Three-month dollar LIBOR rose for a 13th straight session to 0.28617 percent, up from 4 basis points from a month ago.
In a sign of their concern, market authorities in Europe have taken action. From Bloomberg:
France, Spain, Italy and Belgium will impose bans on short-selling from today to stabilize markets after European banks including Societe Generale SA hit their lowest level since the credit crisis.
“While short-selling can be a valid trading strategy, when used in combination with spreading false market rumors this is clearly abusive,” the European Securities and Markets Authority, which coordinates the work of national regulators in the 27-nation European Union, said in a statement after talks ended late yesterday. National regulators will impose the bans “to restrict the benefits that can be achieved from spreading false rumors or to achieve a regulatory level playing field.”
Meanwhile, economic data on Thursday were mixed.
Japan saw a jump in machinery orders in June. AFP/CNA reports:
Japan's core private-sector machinery orders unexpectedly soared 7.7 percent in June from the previous month, official data showed on Thursday...
The core data, which exclude volatile demand from power companies and for ships, rose for the second straight month after a 3.0-percent increase in May and a fall of 3.3 percent in April, figures from the Cabinet Office showed.
However, apart from the positive report on jobless claims, the US also provided a more negative report on the trade situation. MarketWatch reports:
The U.S. trade deficit widened unexpectedly in June, reaching its highest level in almost three years as the nation’s exports were held in check by the global slowdown, according to government data Thursday.
The gap between imports and exports expanded 4.4% to $53.1 billion from $50.8 billion in May, the Commerce Department said.
The biggest factor behind the June deficit was a 2.3% decrease in exports, the largest monthly decline since December 2008.
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