Private hiring jumps, sparking recovery hopes (Reuters)

WASHINGTON (Reuters) – U.S. private companies hired more than double the expected number of workers in June, strengthening views the economy will pick up in the second half of 2011.

A drop in the number of Americans filing applications for unemployment benefits last week also offered hope for the labor market, although they remain too high to signal robust growth.

Payrolls processor ADP said on Thursday private sector employment increased 157,000 after a modest 36,000 gain in May, and beating economists' expectations for a 68,000 rise.

With gasoline prices falling, automakers cranking up production and the decline in house values moderating, the dark clouds over the U.S. economy are starting to lift.

While economists think the economy is pulling out of its first-half slump, they foresee only a modest recovery ahead.

"It's generally a confirmation that the weakness we saw in the May data was more in the way of a bump in the road rather than falling off into some abyss," said David Resler, chief economist at Nomura Securities International in New York.

"The soft patch will prove to be a temporary one, but that doesn't mean we'll be roaring ahead with growth."

The government had been expected to report on Friday that nonfarm payrolls increased 90,000 last month after rising only 54,000 in May, according to a Reuters survey taken last week.

However, the ADP report had some financial institutions, including BNP Paribas and Deutsche Bank, bumping up their forecasts.

"While it is just one month's number, it suggests that maybe what happened was a pause in the economic expansion and as we head into the summer months we're going to pick up some momentum," said Joel Prakken, chairman at Macroeconomic Advisers, joint producers of the ADP employment report.

Initial claims for state unemployment benefits dropped 14,000 to 418,000 last week, the Labor Department said. The decline was more than economists's expectations for a fall to 420,000.

Stocks in Wall Street rose on the data, while government bond prices fell. The dollar was down against a basket of currencies.

Separately, several U.S. retailers reported better-than-expected sales gains in June, a sign they were successful luring shoppers with discounts without undercutting revenue.

Macy's Inc, Costco Wholesale Corp, Target Corp and Gap Inc all beat Wall Street estimates.

Though jobless claims fell last week, they remained above 400,000, a level that is usually associated with a stable labor market, for a 13th straight week.

The four-week moving average of unemployment claims, a better measure of underlying trends, fell 3,000 to 424,750.

The number of people still receiving benefits under regular state programs after an initial week of aid dropped 43,000 to 3.68 million in the week ended June 25.

The number of people on emergency unemployment benefits declined 44,183 to 3.26 million in the week ended June 18, the latest week for which data is available. A total of 7.46 million people were claiming unemployment benefits during that period under all programs, down 61,327 from the prior week.

(Additional reporting by Leah Schnurr in New York)

New Greek aid package awaits private sector buy-in (Reuters)

ROME/FRANKFURT (Reuters) – International bankers and European Union officials made no progress on Thursday in securing a private sector contribution for a second bailout of Greece and bond yields climbed on concern about the scheme.

The managing director of the Institute of International Finance (IIF), a group representing around 400 banks and financial organizations, met representatives from the European Central Bank, the Greek government and the euro zone in Rome to try to break a deadlock over how private creditors might voluntarily maintain their exposure to Greek sovereign debt.

It was the latest in a series of meetings in recent weeks, but there is little sign of the parties reaching a deal. Thursday's meeting, which explored a possible buyback of Greek debt, broke up with no conclusion.

To avoid a debt default by Greece, euro zone finance ministers are trying to put together a second international bailout by mid-September. A private sector debt rollover, in which investors would buy new Greek bonds as existing ones matured, is an important part of the new rescue plan.

Until Thursday, efforts had focused on a French proposal to roll over up to 70 percent of Greek debt maturing before the end of 2014, with a portion of that going into new 30-year Greek bonds that would be guaranteed by other AAA securities.

But attention has now shifted to the possibility of buying back Greek debt, or switching existing Greek bonds for longer-dated ones, which could trigger a default.

In a statement, the IIF said participants had discussed "debt buy-back approaches," but did not go into details.

Reflecting fading hopes for a breakthrough, one banking source commented before the meeting: "The circus moves to Rome."

Partly because of the insistence of the European Central Bank, governments and banks have been trying to put together a debt rollover that would not prompt credit rating agencies to declare a default -- even a limited or "selective default." But that is proving very difficult.

Asked about such a possibility at a news conference after the ECB raised euro zone interest rates by a quarter of a percentage point to 1.5 percent, President Jean-Claude Trichet said: "We say 'no' to selective default or credit event."

Dutch Finance Minister Jan Kees de Jager told a Dutch newspaper on Thursday that if pressure needed to be put on the private sector to ensure its involvement was substantial, then that would just have to be done, despite the implications.

"I think we need to accept that a voluntary contribution is not realistic," he told Het Financielle Dagblad. "If a compulsory contribution from the banks leads to a short and isolated (credit) rating event, then that is not so bad."

BOND YIELDS RISE

Yields on government bonds of indebted euro zone states rose to euro-era highs on Thursday because of concern that any scheme to have private investors pay in a rescue of Greece could be applied to the debt of other countries too.

Portuguese two-year bond yields rose more than a percentage point after rising by more than 4 percentage points on Wednesday following Moody's downgrade of Portuguese debt to "junk." Irish 10-year bond yield jumped more than 0.7 percentage point to 13.42 percent. The euro weakened marginally to 1.4280.

In Frankfurt, the ECB said its rate hike was aimed at curbing inflation, but the move will also increase borrowing costs and pressure on banks in Greece, Ireland and Portugal, as well as other at-risk euro zone states such as Spain.

Trichet said the bank had decided to suspend Portugal's requirement to post collateral for credit operations, a move to soften the burden on Lisbon.

Despite pressure on Spain, Madrid showed it could still fund itself in the markets at affordable rates, attracting strong demand on Thursday for 3 billion euros of three- and five-year bonds, helped by Spanish banks which traditionally purchase their own country's debt.

BAILOUT

The next bailout of Greece, which follows agreement in May 2010 on 110 billion euros of emergency loans, is expected to total around 115 billion euros ($164 billion) and aim to fund Athens until late 2014, when it should return to markets.

Of the total, euro zone governments want the private sector to provide 30 billion euros via the debt rollover. Greece itself would provide a further 30 billion euros to the package by selling state assets, and the remainder would come from the EU and the International Monetary Fund.

Euro zone finance ministers will discuss the outlines of the new plan in Brussels on July 11, but no firm decisions are expected because the private sector's role remains unclear.

In Berlin, Jean-Claude Juncker, the chairman of the 17-member Eurogroup, added his voice to criticism by EU leaders of ratings agencies following Moody's downgrade, saying he favored the creation of a European credit ratings body.

Michel Barnier, the European commissioner for financial regulation, has suggested the licenses of ratings agencies operating in Europe could be revoked if they don't adhere to new, stricter EU rules on their operations.

(With additional reporting by Frankfurt bureau, DeepaBabington in Rome, Martin Santa in Bratislava; writing by LukeBaker; Editing by Andrew Torchia/Ruth Pitchford)

Private hiring jumps, sparking recovery hopes (Reuters)

WASHINGTON (Reuters) – U.S. private companies hired more than double the expected number of workers in June, strengthening views the economy will pick up in the second half of 2011.

A drop in the number of Americans filing applications for unemployment benefits last week also offered hope for the labor market, although they remain too high to signal robust growth.

Payrolls processor ADP said on Thursday private sector employment increased 157,000 after a modest 36,000 gain in May, and beating economists' expectations for a 68,000 rise.

With gasoline prices falling, automakers cranking up production and the decline in house values moderating, the dark clouds over the U.S. economy are starting to lift.

While economists think the economy is pulling out of its first-half slump, they foresee only a modest recovery ahead.

"It's generally a confirmation that the weakness we saw in the May data was more in the way of a bump in the road rather than falling off into some abyss," said David Resler, chief economist at Nomura Securities International in New York.

"The soft patch will prove to be a temporary one, but that doesn't mean we'll be roaring ahead with growth."

The government had been expected to report on Friday that nonfarm payrolls increased 90,000 last month after rising only 54,000 in May, according to a Reuters survey taken last week.

However, the ADP report had some financial institutions, including BNP Paribas and Deutsche Bank, bumping up their forecasts.

"While it is just one month's number, it suggests that maybe what happened was a pause in the economic expansion and as we head into the summer months we're going to pick up some momentum," said Joel Prakken, chairman at Macroeconomic Advisers, joint producers of the ADP employment report.

Initial claims for state unemployment benefits dropped 14,000 to 418,000 last week, the Labor Department said. The decline was more than economists's expectations for a fall to 420,000.

Stocks in Wall Street rose on the data, while government bond prices fell. The dollar was down against a basket of currencies.

Separately, several U.S. retailers reported better-than-expected sales gains in June, a sign they were successful luring shoppers with discounts without undercutting revenue.

Macy's Inc, Costco Wholesale Corp, Target Corp and Gap Inc all beat Wall Street estimates.

Though jobless claims fell last week, they remained above 400,000, a level that is usually associated with a stable labor market, for a 13th straight week.

The four-week moving average of unemployment claims, a better measure of underlying trends, fell 3,000 to 424,750.

The number of people still receiving benefits under regular state programs after an initial week of aid dropped 43,000 to 3.68 million in the week ended June 25.

The number of people on emergency unemployment benefits declined 44,183 to 3.26 million in the week ended June 18, the latest week for which data is available. A total of 7.46 million people were claiming unemployment benefits during that period under all programs, down 61,327 from the prior week.

(Additional reporting by Leah Schnurr in New York)

Blackboard to be taken private in $1.64B deal (AP)

WASHINGTON – Educational software maker Blackboard is being taken private for $1.64 billion in cash by an investor group led by affiliates of Providence Equity Partners.

Under the deal's terms announced Friday, shareholders of Blackboard will receive $45 for each share of Blackboard they own. The price represents a 21 percent premium over the stock's closing price on April 18, the day before the company said it was considering a sale. The stock closed Thursday at $43.39.

The investor group has also agreed to take on $130 million in Blackboard's debt.

Blackboard's board of directors has unanimously approved the deal, but shareholder and regulators must still approve the terms. The buyout will be financed through a combination of stock and debt. Bank of America-Merrill Lynch, Deutsche Bank and Morgan Stanley provided debt financing commitments.

Earlier this year, Blackboard acquired the 90 percent of educational services provider Presidium Inc. that it didn't already own for $53 million in cash.

The company's acquisition by the investor group is expected to close in the last three months of this year. Blackboard's senior management will remain in place.

Blackboard Inc. is based in Washington, D.C.