• G-20 calls for more regulation; pledges $1T+ in emergency aid
• Oil tops $53 per barrel
• U.S. unemployment hits 25-year high
• FASB votes to relax mark-to-market rules
• ECB cuts rates
• Emerging markets rally on Mexico bid for IMF loan

U.S. stocks rose this week, buoyed by signs that the economic slowing may be abating and by efforts of world leaders to end the global crisis. News this week was dominated by a meeting in London of the Group of 20 policymakers, who called for stricter limits on hedge funds, executive pay, credit rating firms, and on risk taking by banks. In addition, the group tripled the lending power of the International Monetary Fund, expanded its reserves, and offered cash to revive trade to help governments weather the turmoil resulting from the surge in unemployment. Altogether, leaders pledged more than $1 trillion in emergency aid to lessen the economic fallout.

On Thursday, the Dow Jones Industrial Average finished at its highest level since February 9, after encouraging economic data rallied stocks around the globe. The relaxation of mark-to-market accounting rules as well as the perceptions of a successful G-20 summit helped the advance. The three major U.S. indices are more than 20% above their bear-market lows of early March.

Commodities rallied this week as evidence mounted that the global economy is stabilizing and world leaders agreed on measures to fight recession. Oil futures followed global equities higher, rising above $53 per gallon on Thursday. Oil prices have increased 16% since the beginning of the year.

U.S. economic news

Job losses hit 25-year high; stalling stocks’ advance 
U.S. stocks retreated Friday after the U.S. Department of Labor reported that unemployment in the United States had surged to a 25-year high, and the jobless rate jumped to 8.5%, the highest level since 1983. The U.S. economy has shed some 5.1 million jobs since the recession began in December 2007, with over two million of those job losses occurring in the past three months.

FASB relaxes valuation rules 
The Financial Accounting Standards Board voted to relax fair-value accounting rules. That decision will give auditors more flexibility in valuating illiquid assets. Banks will thus no longer have to value soured credit bets on the basis of the most recent trades.

Manufacturing decline moderates 
The Institute for Supply Management reported that its manufacturing gauge increased for the third straight month, an indication that the decline in the sector has begun to moderate. The gauge is inching closer to a reading that would indicate an expansion in the economy.

Factory orders rise 
An unexpected rise of 1.8% in February factory orders offset data showing that initial claims for unemployment benefits rose last week to a fresh 26-year high.

U.S. and global corporate news

Companies report mixed earnings; global M&A activity falls

Bombardier’s fourth-quarter profit jumped 42% as sales of trains in Europe rose. However, the company said it will cut 3,000 more jobs in its aerospace unit after business-jet demand deteriorated rapidly.

Net income for Border’s Group, the international bookseller, fell 54% amid a drop in same store sales and margins.

Monsanto achieved record sales in its fiscal second quarter but earned lower net profit as sales of its top-selling herbicides slid amid a sluggish agriculture economy. The company also warned investors that profits will peak this year for the herbicide Roundup. Profits from Roundup have fueled acquisitions and helped Monsanto post impressive growth in recent months.

Shares of Research in Motion rallied after the company reported strong sales of its Blackberry mobile device. Quarterly earnings rose nearly 26%, and RIM predicted fiscal fourth-quarter earnings of about 88 cents per share, a level which was well above analysts’ expectations.

Global merger and acquisition activity fell in the first quarter. U.S. volume gained but more than half of that volume came from two drug company mergers.

France sees rebound in car sales 
French car sales rose 8.1% last month, after falling to a five-month low in February, as sales incentives lured consumers back into showrooms. France has been at the forefront of efforts to prop up Europe’s auto industry since sales in the region fell 18% last year.

Global economic news

ECB cuts rates as eurozone downturn deepens 
The European Central Bank cut its key lending rate by a less-than-expected 25 basis points on Thursday even as the region showed signs of falling deeper into recession. The ECB is slowing the pace of rate cuts as it seeks consensus on what new measures it should take as rates near zero. Following the rate announcement, ECB President Jean-Claude Trichet said policymakers are ready to lower the rate further, and in May will announce full details of possible nonstandard measures to pump money into the economy.

European unemployment rose more than expected in February, to the highest level in almost three years, as the recession forced companies across the continent to cut output. The region’s manufacturing industry contracted more than estimated in March as the deepening economic slump eroded export demand and investor confidence.

Mexico expects economy to shrink; says it will request IMF loan 
Mexico’s finance ministry said it expects the country’s economy to shrink 2.8% this year as the global financial crisis deepens. It expects investment to fall 8.4% and consumption to drop 2.2%. Falling crude prices are expected to lead to a loss of $10.5 billion in oil revenue this year. It is the first time in eight years that the economy is expected to shrink.

On Wednesday, the Mexican government said it would apply for access to a one-year $47 billion line of credit from the International Monetary Fund, which, under a new flexible credit line, extends funding to countries with solid economic policies that are facing short-term liquidity hurdles.

Emerging market stocks, bonds, and currencies rallied on speculation that other developing nations will follow Mexico in taking advantage of the loan program, which is aimed at easing global recession.

Households retrench 
U.K. households increased the equity in their homes at the fastest pace on record as the recession fears convinced households to pay down existing mortgages rather than take out new ones.

Japanese manufacturers’ confidence falls to record low 
Confidence of Japanese manufacturers fell to a record low and prompted executives to signal more spending and job cuts. The index of sentiment among large makers of cars, electronics, and other goods slid more than forecast to the lowest level since the survey began in 1974.

China sees evidence stimulus is working 
China’s manufacturing expanded for the first time in six months, spurred by the government’s $585 billion stimulus package. That package also triggered jumps in urban investment and loan growth in the first two months of the year. Given the new data, it appears that President Hu Jintao may now be on track to achieve his target 8% economic growth rate.

Stay focused and diversified
In any market environment, we strongly believe that investors should stay diversified across a variety of asset classes. By working closely with your financial advisor, you can help ensure that your portfolio is properly diversified and that your financial plan supports your long-term goals, time horizon, and tolerance for risk. Diversification does not guarantee a profit or protect against loss.