The number of applications for unemployment benefits unexpectedly dropped last week to the lowest since April 2008, a sign that the U.S. labor market is strengthening heading into 2012.
Jobless claims fell by 4,000 to 364,000 in the week ended Dec. 17, Labor Department figures showed today in Washington. The median forecast of 45 economists surveyed by Bloomberg News projected an increase to 380,000.
A consistent slowdown in firings lays the foundation for an increase in employment that may bolster consumer spending, which accounts for about 70 percent of the world’s largest economy. At the same time, a possible recession in Europe and a political stalemate in Washington regarding a payroll tax cut are making some companies hesitant to boost hiring.
“Most of the recent improvement in initial claims is genuine and points toward stronger job growth this month,” Aaron Smith, a senior economist at Moody’s Analytics Inc. in West Chester, Pennsylvania, said before the report. “The economy is ending 2011 on a positive note.”
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Dollar Falls as Global Stocks Climb Before U.S. Consumer Sentiment Data
The dollar fell against its higher- yielding peers as stock markets climbed, reflecting reduced demand for the greenback as a haven before a report economists said will show U.S. consumer confidence rose this month.
The American currency slipped the most against the South African rand and Australian dollar as the Stoxx Europe 600 Index gained 1.1 percent, after falling by 0.5 percent yesterday. The euro climbed against the yen and the Swiss franc before Italy’s Senate votes on Prime Minister Mario Monti’s 30 billion-euro ($39 billion) emergency budget plan. The pound traded at almost its strongest level since January as a report showed the U.K. economy expanded more than forecast.
“Both currencies and stocks are driven by this seemingly risk-on mode that the market has reached now,” said Ulrich Leuchtmann, head of currency strategy at Commerzbank AG in Frankfurt. Price swings may be exaggerated as trading volumes drop toward the holidays, he said.
The dollar slipped 1 percent to 8.1578 rand at 8:11 a.m. New York time. It weakened 0.3 percent to $1.0133 against the so-called Aussie. The U.S. currency fell 0.1 percent to $1.3053 per euro. It has depreciated from $1.2946 on Dec. 14, the strongest level since Jan. 11.
The 17-nation European currency climbed 0.1 percent to 101.95 yen, and was 0.2 percent stronger at 1.2239 Swiss francs. The dollar was little changed at 78.11 yen.
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Gold May Fall in New York Trading as ETF Holdings Drop to a 1-Month Low
Gold may decline in New York after holdings in exchange-traded funds dropped to the lowest level in more than a month as investors sold bullion to cover losses in other markets.
Holdings in bullion-backed ETFs, which reached an all-time high of 2,360.81 metric tons on Dec. 14, fell for a fifth day to 2,329.921 tons yesterday, the lowest level since Nov. 17, data compiled by Bloomberg show. The drop in prices may be limited as the euro advanced against the dollar, and bullion’s correlation with the 17-nation currency is the highest since November 2010.
“Declines in ETF holdings may affect the price in the short-term,” Colin Hamilton, a London-based analyst at Macquarie Group Ltd., said in an interview. “Yet, gold continues to trade along with the euro.”
Gold for February delivery was little changed at $1,614.40 an ounce by 7:53 a.m. on the Comex in New York, after gaining as much as 0.3 percent earlier today. Bullion for immediate delivery dropped 0.2 percent to $1,612.69 an ounce.
The euro rose as much as 0.6 percent today against the dollar. The 30-day correlation coefficient between gold and the euro is at 0.65, compared with minus 0.35 on Oct. 7, data compiled by Bloomberg show. That’s the highest since Nov. 3, 2010. A figure of minus 1 means the two tend to move in opposite directions, and 1 means they move in lockstep.
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Oil Rises for Fourth Day as U.S. Supplies Decline by the Most in a Decade
Oil gained for a fourth day in New York after U.S. crude inventories declined the most in a decade, adding to signs that the world’s biggest consumer of crude may avoid a recession.
Futures rose as much as 0.7 percent after gaining 1.5 percent yesterday as Energy Department data showed stockpiles fell 10.6 million barrels, the largest decrease since February 2001. New York oil will average a record $100 a barrel next year as the U.S. averts recession, while London-traded Brent will decline from the 2011 mean, according to a Bloomberg News survey of analysts.
“The big draw was quite bullish,” said Gerrit Zambo, a trader at Bayerische Landesbank in Munich, who predicts oil prices will remain little changed in early 2012. “Macro data in the past week has been mostly positive. I’m slightly optimistic that we won’t fall into a deep recession, and if recession comes it’ll be over quicker than people expect.”
Crude for February delivery on the New York Mercantile Exchange climbed as much as 72 cents to $99.39 a barrel, the highest since Dec. 14, and was at $99.12 at 1:36 p.m. London time. The contract yesterday increased $1.43 to $98.67, the highest close since Dec. 13. Prices have risen 8.5 percent this year after climbing 15 percent in 2010.
Brent oil for February settlement was at $107.97 a barrel, up 26 cents, on the London-based ICE Futures Europe exchange. The European benchmark contract’s premium to West Texas Intermediate futures was at $8.85, compared with $9.04 at yesterday’s settlement and a record $27.88 on Oct. 14.
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U.K. Economic Growth Rises More Than Expected
U.K. economic growth accelerated more than previously estimated in the third quarter in a surge that the Bank of England says is unlikely to be repeated as Europe’s debt crisis curbs bank lending and dents confidence.
Gross domestic product rose 0.6 percent from the previous quarter, faster than the 0.5 percent reported last month, the Office for National Statistics said today in London. Separate data showed the current account deficit widened to a record, partly due falling profits at U.K. banks’ foreign units.
The Bank of England, which has restarted bond purchases to aid the recovery, has said that the U.K. economy may fail to grow in the current quarter and the first part of 2012. In addition to turmoil in Europe, expansion in Britain may be restrained by unemployment at a 17-year high and the government’s ongoing fiscal squeeze.
“A return to recession is looking increasingly likely,” said James Knightley, an economist at ING Group in London. “Fiscal austerity is dampening government spending and the deteriorating euro-zone economy is a massive threat to exports.”
From a year earlier, the economy grew 0.5 percent, and the statistics office said recent data signal a “rather fragile economic picture.” During the nine quarters of the recovery, the economy has gained just over half of the output lost during five quarters of contraction during the recession.
The pound was little changed against the dollar, trading at $1.5685 as of 12 p.m. in London. Gilts stayed higher after the report, with the 10-year yield 3 basis points lower at 2.04 percent. It fell to a record-low 2.016 percent yesterday.
