Business Blog Posts

The dollar steadied after nursing heavy losses, having suffered its biggest decline in more than two years against a basket of major currencies, after a European debt deal sparked a massive relief rally.

The deal in Europe calls for private banks and insurers to take 50 percent losses on their Greek debt as well as agreements on recapitalization of hard-hit European banks and a leveraging of the bloc's rescue fund.

European shares climbed to a 12-week high and those in Wall Street jumped 3 percent, pushing the S&P 500 .SPX benchmark over its 200-day moving average for the first time since early-August.

Risk appetite was further supported by data showing the U.S. economy grew at its fastest pace in a year in the third quarter, a welcome respite for a financial system that seemed on the brink of a recession some weeks ago.

The MSCI Asia Pacific ex-Japan index .MIAPJ0000PUS rose 1.4 percent and is up nearly 10 percent so far this week.

Japan's Nikkei .N225 was up 1.3 percent despite the yen hitting record highs against the dollar for three days in a row.

The dollar index .DXY was up 0.2 percent after falling some 1.6 percent, the biggest one-day fall since May 2009.

The People's Bank of China set the yuan's central parity rate against the U.S. dollar at a record high of 6.3290 on Friday, the highest level since the revaluation in 2005.

In commodities markets, crude oil futures were off 0.5 percent after an over 4 percent rally on Thursday.

Shanghai copper futures rose 6 percent to its daily limit to 61,010 yuan a tonne.

Spot gold was little changed at $1,749.34 an ounce by 0120 GMT and was poised for its biggest weekly gain since January 2009.

(Reporting by Vikram Subhedar; Editing by Kavita Chandran)

Though part of the increase came from the reversal of temporary factors that had restrained growth, the expansion was a welcome relief for an economy that looked on the brink of recession just weeks ago.

U.S. gross domestic product expanded at a 2.5 percent annual rate in the third quarter, the Commerce Department said in its first estimate on Thursday. That was a big acceleration from the 1.3 percent pace in the April-June quarter and matched economists' expectations.

"The probability of a double-dip has diminished quite a bit," said Sung Won Sohn, an economics professor at California State University in the Channel Islands. He made the comments before the release of the report.

Consumer spending in the last quarter was the strongest since the fourth quarter of 2010, while business investment spending was the fastest in more than a year. Even though consumer spending was stronger, businesses were slow in stocking up their warehouses.

The peppier spending and a slower pace of inventory accumulation by businesses will lay a base for a solid fourth quarter, but a slowdown in Europe and the exhaustion of pent-up U.S. demand could leave a weak spot early in 2012.

And the recovery's pace is still too weak to lower a jobless rate that has been stuck above 9 percent for five straight months.

FEARLESS SPENDING

A jump in gasoline prices had weighed on consumer spending earlier in the year, and supply disruptions from Japan's earthquake had curbed auto production. Motor vehicle output has surged as those supply constraints have eased.

In addition, car sales, which were held back by the lack of popular models, have also shown renewed strength.

As a result, consumer spending, which accounts for about 70 percent of U.S. economic activity, grew at a 2.4 percent rate after slowing to a 0.7 percent pace in the second quarter.

The relative vigor comes even though consumer confidence has hit levels last seen during the worst of the 2007-09 recession.

Similarly, while some business surveys have pointed to a contraction in factory output, there is little sign corporate America is cutting back spending. Indeed, recent data has suggested business spending is picking up. Business spending rose at a 16.3 percent pace as companies splurged on equipment and software, and invested in nonresidential structures.

Inventories rose only $5.4 billion in the third quarter, the smallest gain since the fourth quarter of 2009, after increasing $39.1 billion in the second quarter. Inventories subtracted 1.08 percentage points from GDP growth.

Excluding the drag from inventories, the economy grew at a 3.6 percent pace -- pointing to underlying strength in domestic demand -- after expanding 1.6 percent in the April-June period.

Apart from consumer and business spending, growth in the third quarter was also supported by a smaller U.S. trade deficit, and the careful management of business inventories bodes well for fourth-quarter production.

Spending on residential construction rose at a modest 2.4 percent pace after growing at a 4.2 percent rate in the second quarter. Government spending was flat, reflecting continued budget cuts by state and local governments. However, the pace of decline in state and local government spending is moderating.

The GDP report also showed a moderation in inflation pressures, with the personal consumption price index (PCE) rising at a 2.4 percent rate in the third quarter, slowing from the April-June quarter's 3.3 percent pace. Core PCE, which excludes food and energy, rose at a 2.1 percent rate after increasing 2.3 percent in the second quarter.

(Reporting by Lucia Mutikani; Editing by Neil Stempleman)

European policymakers struck a deal to ease the euro zone debt crisis, which will see private bondholders of Greek debt accept a 50 percent loss on their investment and the region's rescue fund be leveraged to 1 trillion euros ($1.4 trillion).

Investors will eye third-quarter U.S. GDP at 8:30 a.m. EDT, with a Reuters survey forecasting a 2.5 percent annual pace of growth, compared with a 1.3 percent annual rate in the second quarter.

Other macroeconomic news investors will watch include U.S. Weekly Jobless Claims and the Chicago Fed Midwest Manufacturing Index for September both at 8:30 a.m. EDT, while September U.S. pending home sales is at 10 a.m. EDT.

Earnings will be a focus, with results from firms including Exxon Mobil (XOM.N), Dow Chemical (DOW.N), Colgate Palmolive (CL.N), Hershey (HSY.N), Avon (AVP.N) and Procter & Gamble (PG.N).

In corporate news, Research in Motion (RIM.TO) has been sued by consumers in the United States and Canada for the service outage that hit BlackBerry devices across the world earlier this month.

A government watchdog agency said the U.S. Treasury department after making great efforts to help Wall Street banks free themselves from the Troubled Asset Relief Program (TARP) should do more to help small banks exit TARP.

The Wall Street Journal reported, citing people familiar with the matter, that American International Group (AIG.N) plans to sell about half its stake in AIA Group Ltd (1299.HK), the Asian life insurer it took public last year.

European shares jumped to a 12-week high on Thursday after euro zone leaders struck a deal to ease the region's debt crisis, led by banking shares.

The FTSEurofirst 300 index .FTEU3 was up 2.4 percent at 1,007.59 points at 0905 GMT (5:05 a.m. EDT).

U.S. stocks rose on Wednesday after plans emerged from the EU summit, with the Dow Jones industrial average .DJI up 1.4 percent, the Standard & Poor's 500 Index .SPX rising 1.1 percent and the Nasdaq Composite Index .IXIC gaining 0.5 percent.

(Reporting by Joanne Frearson; Editing by Jon Loades-Carter)