U.S., World Markets Selloff; Euro Fiscal Crisis

Mayank Mehta, Chandrasekhar Atreya and Darlington Musarurwa
20 May, 2010
New York City

U.S. stocks plunged as investors worry that financial crisis in Europe is developing into a fiscal crisis in the region. U.S. stocks dropped for the sixth day in a row on a weakness in industrial stocks with international sales. Tech heavy Nasdaq dropped nearly 4%.

[R]4:40 PM New York – U.S. stocks plunged as investors worry that financial crisis in Europe is developing into a fiscal crisis in the region. U.S. stocks dropped for the sixth day in a row on a weakness in industrial stocks with international sales. Tech heavy Nasdaq dropped nearly 4%.[/R]

U.S. stock and world markets declined for the sixth day in a row on the euro zone worries and uncertain regulatory environment in the U.S. and Europe. Weak jobs market and cloudy economic outlook also weighed on the sentiment.

Initial U.S. jobless claims increased 25,000 to 471,000 and leading economic indicators showed a decline in April, the first monthly decline in a year.

In New York, Accretive Health prices its offering below the initial range. Symantec acquires the security business of VeriSign for $1.28 billion in cash.

Industrials linked to European sales took the brunt of selling and not a single sector was spared from the selloff. The Nasdaq index declined the most with a loss of nearly 4% and markets in Europe accelerated their declines in the afternoon.

GameStop Corp led gainers in the S&P 500 index with a rise of 6.2%. Dr Pepper Snapple Group raises quarterly dividend 67% and Tiffany by 25%. MF Global net loss narrows and plans as much as 15% staff. GameStop quarterly profit rose to $75.2 million. Dollar Tree net income increases 5%.

European markets accelerated declines in the late afternoon as the tensions rise in the region and the euro traded weak. Markets in the region and UK dropped between 2.2% and 3%. Valeo SA buys 100% of Electrical Systems venture in India. Air France-KLM Group net loss surged to €1.56 billion.

UK indexes dropped more than 2% after European markets declined between 2% and 3%. The pound declines amid U.K. retail trade report. National Grid rights issue is estimated to raise £3.2 billion. Great Portland Estates and Starwood are in a joint venture. SABMiller fiscal 2010 pre-tax profit declines.

The gross domestic product of Japan expanded at 4.9% rate in the first quarter. Resona Holdings plans to buy back the government stake. Large firms to increase bonuses for the first time in two years.

Stocks in Mumbai closed higher after 3G license auction drew nearly twice the revenue that estimated. ONGC and Oil India surged after the government increased the natural gas price terms. Inflation surged in the latest read.

Stocks in Hong Kong and Shanghai dropped on the weak global market sentiments and worries of more property market curbs. Bank of Beijing receives approval to issue 10 billion yuan of subordinated bonds. Industrial Bank plans to raise $2.6 billion through a rights issue.

The Australian dollar drops to an eight-month low against the US dollar. Western Australia expects to post A$290 million surplus. Healthscope receives a revised bid from a private equity consortium. Super-profit tax continues to be controversial in Australia.

North American Markets

Dow Jones Industrial Average dropped 376.36 or 3.6% to close at 10,068.01, S&P 500 Index decreased 43.46 or 3.9% to 1,071.59 and Nasdaq Composite Index fell 94.36 or 4.1% to close at 2,204.01. Toronto TSX Composite Index fell 259.82 or 2.2% to 11,405.95.

Latin American Markets Indexes

Mexico IPC Index dropped 624.68 or 2% to 30,368.08 and Brazil Bovespa Stock Index lost 1,497.24 or 2.5% to 58,192.08.

Europe Markets Review

In London FTSE 100 Index closed lower 113.50 or 2.20% to 5,044.58, in Paris CAC 40 Index decreased 109.26 or 3.11% to close at 3,402.41, in Frankfurt DAX index lower 162.02 or 2.71% to close at 5,826.65. In Zurich trading SMI decreased 138.31 or 2.17% to close at 6,236.12.

Asian Markets Review

The Nikkei 225 Index in Tokyo closed lower 156.53 or 1.54% to 10,030.31, and Hang Seng index in Hong Kong decreased 33.15 or 0.17% to 19,545.83, and CSI 300 index in China lower 36.15 or 1.31% to 2,726.02. ASX 200 index in Australia decreased 70.60 or 1.61% to 4,316.50 and the FTSE Bursa KL Composite index in Malaysia was lower 4.07 or 0.31% to 1,304.16.

The Kospi Index in South Korea decreased 29.90 or 1.83% to close at 1,600.18. JSE Index in Indonesia decreased 35.24 or 1.29% to 2,694.25. The Sensex index in India increased 90.88 or 0.55% to 16,499.37.

Commodities, Metals, and Currencies

Crude oil increased $2.58 to $69.90 a barrel for a front month contract, natural gas edged down 4 cents to $4.12 per mBtu and gasoline decreased 6.64 cents to 194.88 cents.

Soybean future closed up 5.50 cent to $9.44 a bushel. Wheat futures increased 0.50 cents in Chicago trading to $4.69 a bushel. Sugar closed up 0.06 cents at 14.99 cents a pound.

Gold decreased $11.60 in New York trading to close at $1,181.50 an ounce, silver closed down $0.48 to $17.63 per ounce and copper for the front month delivery decreased 0.35 cent to $2.96 per pound.

Dollar edged higher against euro to $1.249 and fell against the Japanese yen to 89.63.

Yield on 10-year U.S. bonds decreased to 3.21% and with 30-year maturities decreased to 4.09%.