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While you were sleeping: Jobless claims, trade deficit fall

Friday 11th November 2011

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Wall Street advanced as investors focused on some positive news from the home front, including better-than-expected jobless claims data and Cisco Systems earnings.

Data showed that new US jobless claims fell for the second week in a row, declining to the lowest level since April. Separately, the trade deficit unexpectedly narrowed in September.

Cisco Systems posted earnings that surpassed expectations, and forecast better-than-expected revenue and profit, boosting shares of the world's biggest networking equipment maker by 7 percent.

Wall Street rebounded from early losses partly caused by concern about France’s credit rating. They recovered after Standard & Poor's said "a technical error" caused a message to be sent suggesting France's credit rating had been changed, adding "This is not the case."

In afternoon trading in New York, the Dow Jones Industrial Average gained 1.10 percent, the Standard & Poor's 500 Index rose 0.95 percent and the Nasdaq Composite Index advanced 0.34 percent.

"People are manic and they have every reason to be. It's the combination of Europe, the continued uncertainty in the economy and lingering concerns about a recession," James Dailey, chief investment officer at TEAM Financial Managers in Harrisburg, Pennsylvania told Reuters.

"The situation in Europe is that there are like 17 chefs in the kitchen plus the ECB. You just don't know what they will do and that just multiplies the complexity."

Meanwhile, Federal Reserve Chairman Ben Bernanke told a military audience at a rare public forum on Thursday that bolstering growth and job creation in the sluggish recovery were top priorities for the central bank.

"For a lot of people, I know, it doesn't feel like the recession ever ended," Bernanke said, according to Bloomberg News. "We at the Federal Reserve have been focusing intently on supporting job creation. Supporting job creation is half of our marching orders, so to speak."

It was another tough day across the pond. Europe’s Stoxx 600 Index ended the day with a 0.4 percent decline.

As Italy is seeking a national unity government, just after Greece managed to do so, investors remained concerned that the woes of the European Union’s third-biggest economy might have far-reaching consequences for the euro-zone.

On a bright note, Italy managed to sell 5 billion euros of bills. It came at a price, with investors demanding an average yield of 6.087 percent, up from 3.570 percent on similar-maturity securities sold last month.

Former European Commissioner Mario Monti emerged as favourite to take the helm from Italian Prime Minister Silvio Berlusconi to steer an emergency government through revamping pensions, labour markets and business regulation.

In Greece, former central banker Lucas Papademos was appointed to lead the nation’s temporary crisis government after days of intense negotiations.

While the European Central Bank is said to have been purchasing Italian bonds this week, central bank officials said there was not much more they could do to help struggling euro-zone members.

In Brussels, a euro zone official told Reuters there were no plans to use the bloc's 440-billion-euro rescue fund to help Italy, even with a precautionary credit line.

"Financial assistance is not in the cards," the official said, according to Reuters. A second official said: "The ECB will be drawn like every one else by the weight of gravity [to act]."

While EU officials are denying talk that they have opened the door for euro-zone members to leave the currency bloc, analysts and investors fear that they might have no other choice.

"You already have one of the great pillars of globalisation, the United States, entering a period of difficulty and looking inward," Thomas Barnett, US-based chief strategist of political risk consultancy Wikistrat - which is being asked by several private clients to urgently model scenarios - told Reuters. "Now one of the other pillars, Europe, looks about to implode."


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