28 April 2010 – Highlights on The Global Front

• US: Home prices in cities rise less than forecast
• US: Confidence increases on jobs outlook
• UK: Retail sales expectations reach five-month high
• Greece: Credit rating cut to junk at S&P as contagion spreads
• Portugal: Suffering Greek contagion

US: Dow plunges 213 points, breaks 11K
Stocks fell Tuesday after Standard & Poors cut Greece’s debt rating to junk and lowered Portugal’s debt rating, raising fears that a euro zone debt crisis could slow the global economic recovery. The slide was the Dow’s biggest one-day point drop since Jul 15, 2009, when it lost 257 points. The Dow Jones industrial average lost 1.9% (-213.0 pts, close 10,992.0). The Nasdaq lost 2.0% (-51.5 pts, close 2,471.5) and the S&P 500 lost 2.3% (-28.3 pts, close 1,183.7). US light crude oil for June delivery fell US$1.76 to settle at US$82.44 a barrel on the New York Mercantile Exchange. (CNNmoney)
US: Home prices in cities rise less than forecast
Home prices in 20 US cities rose less than forecast in February from a year earlier, a sign a housing recovery will take time to develop. The S&P/Case-Shiller home-price index of property values in 20 cities increased 0.6% from Feb 2009, the first gain since Dec 2006, the group said in New York. The median forecast of economists surveyed by Bloomberg News projected a 1.3% advance. Home prices in February were 30% below the peak reached in Jul 2006, indicating the industry that helped trigger the worst recession since the 1930s will take years to recover lost ground. The home-price index was forecast to rise after a y-o-y drop of 0.7% for January, according to the median forecast of 23 economists surveyed. Estimates ranged from a decline of 0.8% to a gain of 1.6%. (Bloomberg)
US: Confidence increases on jobs outlook
Consumers in the US turned more optimistic in April as the growing economy raised hopes jobs will become available. The Conference Board’s confidence index rose to 57.9, exceeding all forecasts of economists surveyed by Bloomberg News and the highest level since Lehman Brothers Inc. collapsed in Sep 2008, according to data from the New York-based private research group. The measure averaged 97 during the last expansion. Americans’ outlook for the next six months climbed to the highest level since Oct 2007, two months before the recession began, as almost one in every five people polled thought the world’s largest economy and employment would improve. The median forecast of 78 economists surveyed by Bloomberg projected the confidence index would rise to 53.5. Estimates ranged from 48 to 57. (Bloomberg)
UK: Retail sales expectations reach five-month high
A UK retail index stayed positive in April as expectations of sales rose to a five-month high, the Confederation of British Industry said. Retailers saying sales volumes rose from a year earlier outnumbered those reporting declines by 13 percentage points, the same as last month, the nation’s biggest business lobby said in a statement in London. The gauge of expectations rose to 17 from 14 in April. The report is based on a survey of 75 companies between Mar 24 and Apr 14. UK retail spending is recovering after the worst recession on record drove unemployment to a 16-year high in the quarter through February. Footwear and food grocers reported “strong” annual sales growth, while trading at home-improvement stores stabilized after three months of declines, the CBI said. The gauge tracking the three-month moving average pace of overall retail sales growth gained seven percentage points to 16 in April, the highest since Aug 2007, the group said. (Bloomberg)
Greece: Credit rating cut to junk at S&P as contagion spreads
Greece’s credit rating was cut three steps to junk by Standard and Poor’s, the first time a euro member has lost its investment grade since the currency’s 1999 debut. The euro weakened and stock markets throughout the region plunged. Greece was lowered to BB+ from BBB+ by S&P, which also warned that bondholders could recover as little as 30% of their initial investment if the country restructures its debt. The move, which puts Greek debt on a par with bonds issued by Azerbaijan and Egypt, came minutes after the rating company reduced Portugal by two steps to A- from A+. The turmoil comes as European Union policy makers struggle to agree on measures to ease the panic over swelling budget deficits. Leaders of the 16 euro nations may hold a summit after the Greek government’s decision last week to tap a €45bn (US$60bn) emergency-aid package failed to reassure investors, a European diplomat and Spanish official said. (Bloomberg)
Portugal: Suffering Greek contagion
With a higher debt burden and a slower 10-year growth rate than Greece, Portugal is being punished by investors as the sovereign debt crisis spreads. The risk premium on Portuguese bonds rose to more than double the past year’s average this month. Portugal’s credit default swaps show investors rank its debt as the world’s eighth-riskiest. Standard & Poor’s cut its long-term local and foreign currency sovereign rating for Portugal to A- from A+ and said the outlook was negative. Portuguese spreads, the extra yield that investors demand to hold its debt rather than German equivalents rose to 260 basis points, the most since at least 1997. Portuguese Prime Minister Jose Socrates’ push to convince investors his country will avoid Greece’s fate is being hobbled by an economy that’s expanded less than an annual average of 1% for a decade and is reliant on tourism and industries such as cork and pulp. (Bloomberg)