For the week ended October 7, 2011

Week in Review: Stocks rise amid hopes that Europe will contain its crisis

• ECB resumes bond purchases
• BOE expands bond-buying program
• U.S. employers add more jobs than expected
• Moody's downgrades U.K. and Portuguese banks
• Apple's Jobs dies; iPhone 4S debuted

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By Deborah Levine
NEW YORK (MarketWatch) - Treasury prices jumped and the dollar sank on Friday after the U.S. Labor Department said the economy added 54,000 jobs in May, far less than the 125,000 expected by economists surveyed by MarketWatch. A shockingly-weak ADP private employment report earlier this week caused analysts and investors to lower their hopes for a solid nonfarm payrolls report. Mortgage rate maybe on the move.

Stocks clawed their way back this week from near bear-market territory amid optimism that European leaders are making progress in containing the region's sovereign debt crisis and as better-than-expected U.S. economic data added to evidence that the United States is maintaining its expansion.

U.S. and global economic news

ECB resumes bond purchases
The European Central Bank resumed covered bond purchases and reintroduced year-long loans for banks. The central bank, however, did not cut interest rates, keeping its benchmark at 1.5% at its meeting this week. The ECB did acknowledge that the downside risks to the economy have intensified. Meanwhile the European Commission has been pushing for a coordinated capital injection for banks to shield them from the fallout of a potential Greek debt default.

BOE expands bond-buying program
The Bank of England this week expanded its bond-buying program for the first time in two years. The bank raised the ceiling for so-called quantitative easing to £275 billion from £200 billion in an effort to stop the euro region debt crisis from pushing the U.K. economy back into recession.

U.S. employers add more jobs than expected
The U.S. Department of Labor reported that employers added more jobs that expected in September and that job gains were revised up for the prior two months. The news eased some concern over the possibility of renewed recession, although the pace of job growth is still too slow to push down the unemployment rate, which held at 9.1%. Payrolls rose by 103,000.

Other U.S. data also positive
Other encouraging U.S. economic news helped bolster investor sentiment this week. U.S. manufacturing unexpectedly accelerated in September, and service sector activity and same-store sales results from retailers topped expectations. Japan's Tankan shows manufacturers' sentiment still weak The Bank of Japan's quarterly Tankan index of sentiment at large manufacturers rose to 2 in September from - 9 in June. The reading shows that sentiment is worse than it was before the March earthquake, a signal that concern over a weakening global demand will restrain the nation's recovery.

U.S. and global corporate news

Moody's downgrades U.K. and Portuguese banks
Moody's Investors Service cut the senior debt and deposit ratings of 12 British lenders, noting that the government would be less likely to provide support for the banks in the event of failure. The Bank of England, the Financial Services Authority, and the Treasury have said that in the future banks that fail should not expect a taxpayer-funded bailout. Lloyds TSB Bank, Santander UK, and Co-operative Bank had their ratings lowered one step while Royal Bank of Scotland and Nationwide Building Society were cut two levels. Moody's also lowered its standalone ratings for six Portuguese banks, citing lower asset quality, increased risk from Portuguese sovereign debt holdings, and funding strains.

Apple's shares hold steady after Jobs' death; iPhone 4S debut
Apple's shares held steady following the death of Steve Jobs, Apple's chairman and cofounder. Jobs had battled pancreatic cancer and stepped down as chief executive in August. His death came two days after Apple debuted its iPhone 4S. The long awaited device will use two antennas to improve call quality and a processor that is seven times faster than the chip in the previous iPhone.

Sprint to offer iPhone Sprint Nextel struck a deal to offer Apple's iPhone, joining rivals AT&T and Verizon. Sprint had been struggling to compete with those rivals, who were able to lure potential customers with the offer of the iPhone.

Dexia to split up
Franco-Belgian bank Dexia announced a planned breakup to protect its Belgian depositors and its municipal-lending business in France. France and Belgium are trying to split up, bank's assets in a manner designed to avoid injecting more capital. Trading in Dexia's shares was suspended on Thursday as governments and the bank's management scrambled to figure out what to do with the lender. The bank is said to have heavy exposure to Greek and Italian debt, a factor that has made other financial institution wary of lending to it.

Sources: MFS research; The Wall Street Journal; The Wall Street Journal Online; Bloomberg News; Financial Times; Forbes.com; CNNMoney.com; msnbc.com. The Wall Street Journal Digital News

This is not a loan commitment. Programs are subject to change without notice and are only available to qualified borrowers. Underwriting terms and some restrictions may apply.

The week ahead

• Alcoa marks the unofficial start of the fourth-quarter earnings season when it reports results on Tuesday, October 11.
• Japan releases reports on machinery orders on Tuesday, October 11.
• Eurostat releases its report on industrial production in the eurozone on Wednesday, October 12, and on inflation on Friday, October 14.

Sources: MFS research; The Wall Street Journal; The Wall Street Journal Online; Bloomberg News; Financial Times; Forbes.com; CNNMoney.com; msnbc.com.

This is not a loan commitment. Programs are subject to change without notice and are only available to qualified borrowers. Underwriting terms and some restrictions may apply.