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Global Market Wrap-Up - February 5, 2013

Tuesday, February 5, 2013
Mark Hanna
U.S. stocks reversed almost all of Monday's losses, apparently on news of "less bad" news out of Europe and a continued drop in the yen. The S&P 500 gained 1.0% and the NASDAQ 1.3%.
  • The Institute for Supply Management’s index of U.S. non- manufacturing businesses, which covers about 90 percent of the economy, fell to 55.2 in January from the prior month’s 55.7. The median forecast of economistswas 55. Readings above 50 signal expansion.
  There was a news release out by the Congressional Budget Office today as well.
  • The CBO estimates that this year's deficit will fall to $845 billion, or 5.3% of the size of the economy, in part because of sequester, automatic spending cuts across defense and nondefense programs set to take effect March. If that happens, 2013 would mark the first time since 2008 that the annual deficit comes in below $1 trillion. However just today Obama said he'd like to kick the can on the sequester down the road a few months more, hoping to push an agreement of smaller spending cuts through in its place.
  • For the decade, the CBO expects the country to add $7 trillion in debt. "We have a large budget imbalance. Small changes will not be sufficient to put the budget on a sustainable path," CBO director Douglas Elmendorf said Tuesday.
  • The rate on the 10-year Treasury is projected to rise from 1.9% currently to 5.2% by the end of the decade. Annual interest payments will more than double over the decade, jumping from 1.4% of GDP to 3.3% by 2023, when interest payments will total $857 billion for that year alone.
  • The CBO expects the unemployment rate will fall from 7.9% this year to 5.3% by 2023. But it won't dip below 7.5% until 2015. "If that happens, 2014 would be the sixth consecutive year with unemployment exceeding 7.5% -- the longest such period in the past 70 years," the CBO report said.
Oil gained 0.5% to $96.64, gold dropped 0.2% to $1673.50, and silver jumped 0.5% to $31.88.

British shares gained 0.6%, German shares 0.35% and French shares 0.95% as yesterday's worries about Spain and Italy were forgotten.
  • Business activity in the euro zone shrank at its least severe rate in 10 months in January, helped by growth in Germany. The measure of activity in the services sector for the euro zone rose to 48.6 in January from 47.2 in December, according to Markit's Composite Purchasing Managers' Index. Figures below 50 indicate contraction.
  • Retail sales in the euro area fell sharply in December, the largest month-on-month decline since April 2012 and the worst drop since February 2009 in annualized terms.
Japan's market dropped 1.9% while China's gained 0.2%.
  • In China, nationwide service-sector activity as measured by the HSBC China Services Purchasing Managers' Index rose to 54.0 in January from 51.7 in December.