S&P and Dow Fall 1.8%; U.S. Jobless Claims, Saudi and Spain in Focus

Bikram Pandey
10 Mar, 2011
New York City

U.S. indexes dropped 1.8% after weekly jobless claims rose and trade deficit increased more than expected. Market sentiment turned sour following the release of two economic reports and the resurfacing of the sovereign debt worries in Europe and a decline in Libyan oil production and Saudi protests.

[R]5:00 PM New York – U.S. indexes dropped more than 1.8% after weekly jobless claims rose and trade deficit increased more than expected. Market sentiment turned sour following the release of two economic reports and the resurfacing of the sovereign debt worries in Europe and a decline in Libyan oil production.[/R]

U.S. indexes scaled lower after weekly unemployment rose more than expected and monthly trade deficit also jumped. The selloff accelerated in the late afternoon on the news that Saudi Arabian police fired rubber bullets to disperse a small group of protesters in an eastern town of Qatif.

Market sentiment also turned sour after Spain’s sovereign rating was downgraded and intense fighting in Libya continued. Spain later in the day said it disagreed with the views of the rating agency about the adequacy of the capital at its banks.

Oil prices declined in a volatile trading and rebels in Libya fled the oil complex town of Ras Lanuf under a heavy bombardment and airstrikes by the Libyan army.

Overseas markets also declined after Spain’s rating was downgrade by Moody’s. Though the views of the rating agencies are not that critical for investors and are generally considered as a lagging indicator, none the less the ratings downgrade come at a time when Spain is getting ready to roll over some debt.

In addition, markets in Asia were lower after China reported a surprised trade deficit in February.

In merger news, HCA Holdings raised $3.79 billion in IPO and Cumulus agreed to acquire Citadel Broadcasting for $2.4 billion.

European indexes fell as Libya, Spain downgrade and worries of inflation brought back the market sentiment seen last summer. French non-farm payroll employment rose in the fourth quarter. German trade surplus declined in January. Spanish retail sales fell in January. BMW annual net surged.

The UK indexes plunged after the Bank of England retained key rate at 0.5% and bond buying program. British manufacturing output rebounded and industrial production slackened in January and Irish inflation soared in February. Rio Tinto raised its conditional offer for Riversdale.

Tokyo indexes closed lower after China reported its first monthly trade deficit and Libya remained in focus. Japan revised its last quarter economic decline to 1.3% from the previous estimate of 1.1% fall. Tokyo Stock Exchange Group and Osaka Securities Exchange are reported to explore a merger combination.

Stocks in Shanghai fell after China reported its first monthly trade deficit in nearly a year as imports rose at a faster pace than exports. For the two months to February China slipped into a deficit. Automakers declined after February auto sales rose 2.9% from a year ago.

Stocks in Mumbai declined on a weakness in global markets and crude oil traded near recent highs. The latest read on inflation showed a decline in food prices. Exports in February increased 49.8% to $23.6 billion but trade deficit hovered near $8 billion.

Australian indexes declined as markets in Asia fell and resource prices edged lower. Australian economy lost 10,100 jobs in February and inflation expectation declined according to a private survey. Rio Tinto lifts its conditional offer for Riversdale to $16.50 a share.

Commodities, Bonds and Currencies

Yield on 10-year bond decreased to 3.39% and on 30-year bond fell to 4.51%.

The U.S. dollar increased to $1.370 to a euro and increased against the Japanese yen to 82.87 yen.

Immediate delivery futures of Texas crude oil decreased $2.03 to $102.35 a barrel, of natural gas decreased 0.09 cents to $3.83 per mbtu and gasoline prices decreased 1.4 cents to 301.30 cents a gallon.

In metals trading, copper prices decreased 2.55 cents to $4.18 per pound, gold decreased $18.10 to $1,411.50 per ounce and silver fell $0.88 to $35.16.