Wednesday's News Recap: Oil Soars on Israeli PM Resignation, ADP Jobs Up 9k

News Recap | Written by CEP News | Jul 30 08 20:26 GMT |

(CEP News) - Oil prices shot back up Wednesday afternoon by more than $5 a barrel following the resignation of Israel's Prime Minister. Earlier in the day, the private employment figure for July released by ADP came in higher than expected and the Federal Reserve announced an addition Term Auction Facility worth $25 billion. A two-week slide in oil prices came to an abrupt end this afternoon when Israeli Prime Minister Ehud Olmert announced his resignation, effective in September. Oil shot up by more than $5 to above $127 a barrel on fears about instability in the Middle East. Crude oil was down earlier in the day following the release of a lower-than-expected drop in U.S. oil inventories. The Energy Information Administration reported an 81k drop in U.S. crude stockpiles for the week ending July 25, much lower than the consensus estimate of 1300k from economists. The EIA said imports were in line with the four-week average and increased to 10 million barrels per day from 9.8 million the week prior. Gasoline inventories were expected to rise 350k barrels on the week but decreased by 3525k. Distillate inventories slightly overshot expectations for a 2050k build by increasing 2396k. Private non-agricultural employment in the United States unexpectedly rose by 9k jobs in July, according to a report released from Automatic Data Processing Inc Wednesday. The previous month's data was revised slightly to a loss of 77k from an originally reported loss of 79k. The figure was much better than expectations, which were looking for a pullback of 65k jobs. The increase was driven by growth in the service sector, which saw an advance of 74k jobs, while jobs in the goods producing sector fell 65k and manufacturing pulled back 49k. Economists were quick to douse optimism over the better-than-expected reading, with many saying the report would not cause them to change their forecasts for Friday's upcoming nonfarm payrolls report from the Bureau of Labor Statistics, which is expected to show a loss of 75k jobs in July. "Nonfarm and the government reports have been diverging from the ADP the last couple of months," said Stephen Wood, senior portfolio strategist at Russell Investments. "So, ADP has been optimistic or positive or more positive than the nonfarm numbers have been, but what I think it's looking towards is a stabilization more than a market improvement." The Federal Reserve announced today that in addition to its $75 billion, 28-day Term Auction Facility (TAF), the Fed will also be conducting a $25 billion, 84-day TAF to address the ongoing "fragility" of the financial system. The Fed also said it would be extending its extraordinary lending to late January 2009, "in light of continued fragile circumstances in financial markets." The U.S. Treasury Department will hold $27 billion in auctions for 10 and 29 3/4-year bonds next week, officials said in the quarterly refunding statement. The 10-year note will be auctioned Aug. 6 at 1 p.m. while the 29 3/4-year bond will be sold the following day at the same time. Both auctions will settle Aug. 15. On the same day, the Treasury will refund approximately $43.5 billion in maturing securities. The 10-year auction will be for $17 billion and the 29 3/4-year auction for $10 billion. Annual unemployment rates grew higher in June in 332 out of 369 metropolitan areas, while falling in 27 other areas, according to the U.S. Bureau of Labor Statistics. This is an increase from the previous month where unemployment grew in 328 out of 369 metropolitan areas. The national unemployment rate for the month was 5.7%, not seasonally adjusted, up from 4.7% a year ago. Meanwhile, online advertised job vacancies dropped by 5.4% on a year-over-year basis in July, according to the Conference Board Help-Wanted OnLine Data Series released on Wednesday, marking the fifth consecutive month of national declines. The Conference Board said there were 3.864 million online advertised job vacancies in July, compared to a revised estimate of 4.195 million jobs in the previous month. Fannie Mae's portfolio balance surged 22.8% on the year to $749.6 billion in June, the mortgage insurer said on Wednesday, as delinquency rates in the United States continue to move higher. Fannie reported serious delinquencies on loans backed by the agency moved up to 1.3% in May from 1.22% in April. The government-sponsored enterprise's (GSE) issuance of mortgage-backed securities in May also totalled $63.3 billion in May Hope Now, the private sector alliance of mortgage service providers, counsellors and investors, announced that mortgage service providers have staved off the foreclosure of 1.9 million homes in the past year in what has been the largest bailout the housing industry has ever seen. Mortgage service providers saved 181,000 homes from foreclosure in June, while the second quarter saw 522,000 workouts completed, Hope Now reported. Weekly mortgage applications in the United States declined in the week ending July 25, according to data released from the Mortgage Bankers' Association (MBA) on Wednesday, which reported a 14.1% week-over-week fall in applications. In the previous week, applications fell 6.2%. In Canada, a 6.1% increase in petroleum and coal products in June helped Statistics Canada's Industrial Product Price Index (IPPI) climb 1.3% in June over May while crude oil pushed the Raw Materials Price Index (RMPI) up 4.4% in the month. Both index figures came in above consensus forecasts of a 0.6% increase for manufactured goods and a 3.1% rise in raw materials. StatsCan also reported that domestic production of crude and equivalent hydrocarbons totalled 12.8 million cubic metres in May, down 4.7% from the same month a year earlier. Exports in the month totalled 8.9 million cubic metres, down 2.8% year-over-year. Imports of crude, meanwhile, fell 5.2% from May of last year to 3.9 million cubic metres. A Bank of Canada auction of C$2 billion, five-year 3.50% Treasury notes drew a high yield of 3.379% allotted to 56.34375% of bidders on Wednesday. The average yield was 3.376% and the low 3.373%. Non-competitives took C$59,100,000 of a total C$5,002,100,000. A report from CIBC expects Canada's GDP to come in at just 1.1% in 2008 before rising up to 2.8% next year. The report pegs growth in gross domestic product at 0.9% in the third quarter of this year and 3% in the final three months. The headline rate of inflation, meanwhile, is expected to climb to 3.9% in the fourth quarter of this year and come in at 2.9% for 2008 as a whole. In 2009, the CIBC report says, headline inflation in Canada will be 3.9%. In its world economic outlook, the Conference Board of Canada said strong export markets should help the U.S. dodge an outright recession this year. The weak American dollar and growth in emerging markets will provide some good news for an economy that is reeling from soaring energy prices and the housing market meltdown, the report noted. In overnight news, the European Commission reported that business sentiment in the euro zone declined further than expected in July, as reflected by the business climate indicator falling to -0.21 from June's 0.13 level. Economists had expected a less pronounced fall to -0.02. The EU Commission also reported stronger-than-expected falls in all of its euro zone confidence indicators for the month. Against expectations of only a one-point decline, euro zone consumer confidence slipped all the way to -20 in July from June's -17 print. By Stephen Huebl, shuebl@economicnews.caThis email address is being protected from spam bots, you need Javascript enabled to view it , with contributions from Steve Stecyk, sstecyk@economicnews.caThis email address is being protected from spam bots, you need Javascript enabled to view it , Patrick McGee, pmcgee@economicnews.caThis email address is being protected from spam bots, you need Javascript enabled to view it , Adam Button, abutton@economicnews.caThis email address is being protected from spam bots, you need Javascript enabled to view it , Sean McKibbon, smckibbon@economicnews.caThis email address is being protected from spam bots, you need Javascript enabled to view it and Geoff Matthews, gmatthews@economicnews.caThis email address is being protected from spam bots, you need Javascript enabled to view it , edited by Cristina Markham, cmarkham@economicnews.caThis email address is being protected from spam bots, you need Javascript enabled to view it CEP Newswires - CEP News © 2008. 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