Greece Default Worries Stoke Contagion Fears

Arthi Gupta
27 Apr, 2010
New York City

U.S. stocks traded lower as investors fear Portugal, Spain and Ireland may struggle to repay sovereign debts. Greek 2-year bond yields soared to 15% and Athens benchmark index plunged 5% on the rising default probabilities. Deutsche Bank, Ford, DuPont reported better than expected earnings.

[R]10:00 AM New York – U.S. stocks traded lower as investors fear Portugal, Spain and Ireland may struggle to repay sovereign debts. Greek 2-year bond yields soared to 15% and Athens benchmark index plunged 5% on the rising default probabilities. Deutsche Bank, Ford, DuPont reported better than expected earnings.[/R]

U.S. stocks traded lower as investors fear widening contagion enveloping Greece, Portugal, Spain, Ireland and Italy.

Markets in Spain, Portugal and Italy declined between 2% and 2.4%. The ASE index in Greece plunged 5% as fears of default rise. The 2-year bond yields soared to 15%.

The dollar advanced against the euro and the pound, but weakened against the yen. Lack of demand has offset increased U.S. crude supplies and oil prices declined for the second consecutive day.

The Federal Reserve Open Market Committee is scheduled to begin its two-day meeting today.

Goldman Sachs Chief Executive Lloyd Blankfein, Fabrice Tourre and others from the firm will testify before the Senate Permanent Subcommittee on investigations regarding the role investment banks played in the financial crisis.

The Greek bailout plan seems to be in jeopardy after demands from German Chancellor Angela Merkel to reduce Greece’s budget deficits.

Commodities, Currencies and Yields

Dollar edged higher against euro to $1.3312 and decreased against the Japanese yen to 93.78.

Crude oil decreased $0.92 to $83.28 a barrel for a front month contract, natural gas edged lower $0.05 cent to $4.21 per mBtu and gasoline decreased 1.230 cents to 232.86 cents.

Gold decreased $2.40 in New York trading to close at $1,151.60 per ounce, silver closed lower $0.154 to $18.21 per ounce and copper for the front month delivery decreased 5.500 cents to $3.49 per pound.

Yields on 10-year U.S. bonds increased to 3.78 % and on 30-year U.S. bonds traded at 4.64%.

Stock Movers

Emulex Corporation, the chipmaker declined 7.6%.

SolarWinds, Inc., the maker of network-management software plunged 10.2%.

Solutia Inc., the chemical maker gained 6.0%.

Veeco Instruments Inc. rose 4.5% after the maker of gear for chipmakers and data storage said second quarter 2010 revenue is currently forecasted to be between $220 million to $240 million and earnings per share between $1.02 and $1.20.

Zoran Corporation decreased 6.6% after the maker of software and chips for digital audio and video products estimates second quarter 2010 revenues to range between $90 million and $94 million.

Earnings Review

Alcon, Inc. ((ACL)), the eye care products maker said first quarter sales rose 15.4% to $1.72 billion from $1.49 billion a year ago. Net income in the quarter rose 27% to $573 million or $1.89 per diluted share compared to net income of $452 million or $1.51 per share a year ago.

Canadian National Railway Corporation ((CNI)), the freight carrier said first quarter revenues rose 6% to $1.97 billion from $1.86 billion a year ago. Net income in the quarter rose 20.5% to $511 million or $1.08 per diluted share compared to net income of $424 million or 90 cents per share a year ago.

Deutsche Bank first quarter earnings increased to 1.8 billion euros amid improving sale of debt and equities, up from last year’s first quarter profit of 1.2 billion euros. Net revenues rose 24% to 9 billion euros in the quarter ending in March compared to 7.2 billion euros in the first quarter a year ago.

E.I. DuPont de Nemours & Company reported net income for the quarter grew to $1.14 billion or $1.24 a share from $489 million or $0.54 last year. Quarterly net sales advanced 23% to $8.48 billion from the previous year''s revenue of $6.87 billion.

Ford Motor Company first quarter revenues increased $31.6 billion up from $24.4 billion in the prior year quarter. Net income was $2.1 billion, or 50 cents per share, a $3.5 billion improvement from first quarter 2009.

Jacobs Engineering Group Inc. ((JEC)), the technical services provider said second quarter sales fell 13% to $2.59 billion from $2.98 billion a year ago. Net income in the quarter fell 29% to $77.5 million or 62 cents per diluted share compared to net income of $109.3 million or 88 cents per share a year ago.

Asian Markets Review

The Nikkei 225 Index in Tokyo closed higher 46.87 or 0.42% to 11,212.66, Hang Seng index in Hong Kong decreased 325.27 or 1.51% to 21,261.79 and CSI 300 index in China lower 63.59or 2.00% to 3,108.41. ASX 200 index in Australia decreased 1.50 or 0.03% to 4,880.00. The FTSE Bursa KL Composite index in Malaysia closed lower 0.35 or 0.03% to 1,339.72.

The Kospi Index in South Korea decreased 2.65 or 0.15% to close at 1,749.55. SET index in Thailand closed lower 2.34 or 0.31% to 762.00 and JSE Index in Indonesia decreased 5.41 or 0.18% to 2,939.30. The Sensex index in India decreased 54.66 or 0.31% to 17,690.62.

Europe Markets Review

In London FTSE 100 Index traded lower 71.60 or 1.24% to 5,682.25, in Paris CAC 40 Index decreased 68.09 or 1.70% to 3,929.30 and in Frankfurt DAX index traded lower 58.77 or 0.93% to 6,273.33. In Zurich trading SMI decreased 69.27 or 1.02% to 6,734.47.