Morning Market Roundup: Unemployment Aid, Italy & Spain's Borrowing Rates, & Home Foreclosures up

Here’s what’s important in the business world this morning:

Unemployment: The Labor Department said Thursday that weekly unemployment benefit applications rose 6,000 to a seasonally adjusted 386,000, an increase from an upwardly revised 380,000 the previous week.

The four-week average, a less volatile measure, rose for the third straight week to 382,000. That's the highest in six weeks.

Weekly applications are a measure of the pace of layoffs. When they drop below 375,000, it typically suggests hiring is strong enough to reduce the unemployment rate.

Applications fell steadily during the fall and winter but have since leveled off.

At the same time, hiring has slowed, raising concerns about the pace of the so-called "recovery." Employers added an average of only 96,000 jobs per month in the past three months. That's down from an average of 252,000 in the previous three months.

Weaker hiring also pushed up the unemployment rate in May to 8.2 percent, its first rise in nearly a year.

Foreclosures: Lenders initiated foreclosure proceedings against more U.S. homeowners in May, setting the stage for increases in home repossessions and short sales -- scenarios that could further weigh down home values in coming months.

Default or scheduled-home-auction notices were filed for the first time against 109,051 homes last month. That's an increase of 12 percent from April and up 16 percent versus May last year, foreclosure listing firm RealtyTrac Inc. said Thursday.

The firm monitors documents filed on properties with mortgages that have gone unpaid. Once that process begins, homes can end up foreclosed-upon, sold at auction or via a short sale. A short sale is when the bank agrees to accept less than what the borrower owes on their mortgage.

May was the first month since January 2010 that the number of homes starting on the foreclosure path rose on an annual basis. But the trend has been visible in the monthly numbers, with four out of the first five months of this year recording increases over the preceding month.

Spain & Italy: Spain's key borrowing rate hit a fresh high Thursday not seen since the country joined the euro in 1999, after a credit ratings agency downgraded the country's ability to just above junk status amid rising fears a bank bailout may not be enough to save the country from economic chaos.

The interest rate - or yield - on the country's benchmark 10 years bonds rose to a record 6.96 percent in early trading Thursday, close to the level which many analysts believe is unsustainable in the long term and the rate that forced Greece, Ireland and Portugal to seek bailouts of their public finances.

The ratings agency Moody's downgraded Spain's sovereign debt three notches from A3 to Baa3 Tuesday night, leaving it just one grade above "junk status".

Meanwhile, Italy's borrowing costs on its three-year bonds skyrocketed Thursday to their highest level since December, as concerns about Spain and the state of Europe's economy continued to pummel the country's financial markets.

Italy paid 5.3 percent, up from 3.91 percent last month, to raise (EURO)3 billion ($3.76 billion) in three-year money from financial markets. The sale was fully subscribed, but the high rate underscores how investors are increasingly wary of lending to the country as it wallows in a deep recession and sees its debt pile increase.

Italy also auctioned 10-year bonds at a worryingly high rate of 6.13 percent and 15-year bonds at 6.1 percent. It sold a combined total of (EURO)1.5 billion in the two denominations, the maximum sought.

The Associated Press contributed to this report.