U.S. and Asian Markets Diverge; Oil Spikes, Middle East Unrest Contagion

Bikram Pandey
14 Feb, 2011
New York City

U.S. stocks struggled after a sustained rise in the last six weeks. U.S. President Barack Obama proposed a $3.7 trillion budget with a deficit of $1.1 trillion. China

[R]4:00 PM New York – U.S. stocks struggled after a sustained rise in the last six weeks. U.S. President Barack Obama proposed a $3.7 trillion budget with a deficit of $1.1 trillion. China’s January trade surplus shrank 55% to $6.5 billion. Brent Crude oil futures rose to a 2-year high as unrest spreads in the Middle East.[/R]

U.S. stocks edged lower in the early trading after rising in 12 of the last fifteen trading sessions. Japan’s economy shrank 1.1% in the last quarter and fell to the third place after the U.S. and China. China’s trade surplus shrank 55%.

U.S. President Barack Obama proposed a $3.7 trillion budget that estimates deficit of $1.1 trillion in the fiscal year 2012. The proposed deficit is the fourth consecutive year of deficit above $1 trillion. In the current year the deficit is expected to reach $1.6 trillion or 10.9% of gross domestic product and decline to 7% in the proposal.

Unrest in the Middle East spreads to Bahrain, Iran and Yemen and Brent crude oil futures rose to 2-year high to $103.08 a barrel.

Emergency Medical agreed to go private for $3.2 billion. EchoStar agreed to acquire Hughes Communications for $2 billion.

Atlas Air fourth quarter net income increased 47% to $41.6 million. Diebold reported fourth quarter net loss in the quarter was $120 million. MGM Resorts net loss in the fourth quarter declined to $139 million.

European market indexes closed mixed with a downward bias. Banks declined after the rating agency said it will revise its guidelines and factor in government support at more than 170 banks. The move is widely considered too late and too little. Credit Suisse strengthened capital through bonds sales of $6 billion.

UK shares surged on the takeover talks and higher commodities prices in London trading. General Electric Company agreed to acquire the well-support division of John Wood Group Plc for $2.8 billion. The benchmark index closed nearly flat.

Stocks in Tokyo reopened after three-day weekend and surged 1.1%. Exporters and electronics companies closed higher. Fourth quarter GDP declined 1.1% and for the year 2010 rose 3.9% to $5.47 trillion.

Stocks in Mumbai surged after earnings from Tata Motors, Adani Enterprises and Gitanjali Gems Limited. The benchmark index soared 2.6%.Reliance Communication quarterly net dropped 56%. Tata Motors quarterly net soared nearly three-fold.

Australian stocks closed higher on mixed earnings reports. Macarthur Coal estimated full year net of at least $138 million. IAG dropped after it reported higher than expected losses from Queensland floods and in the UK.

Commodities, Bonds and Currencies

Yields on 10-year bond decreased to 3.60% and on 30-year bonds fell to 4.66%.

The U.S. dollar decreased to $1.348 to a euro and rose against the Japanese yen to 83.30 yen.

Immediate futures prices of Texas crude oil increased $0.93 to $84.65 a barrel, for natural gas rose 0.02 cents to $3.92 per mbtu and gasoline prices increased 5.14 cents to 251.66 cents a gallon.

Brent crude oil futures of immediate month delivery rose $2.14 to $103.08 a barrel.

In metals trading, copper prices increased 9.05 cents to $4.62 per pound, gold increased $1.60 to $1,362.00 per ounce and silver rose 53 cents to $30.53.