U.S. Indexes Trim Losses After Fed Holds Rates

Bikram Pandey
15 Mar, 2011
New York City

U.S. indexes extended losses following a global selloff after the benchmark index in Tokyo suffered its worst one day loss in 24 years. Rising tensions in Saudi Arabia and ongoing violence in Libya also added to market jitters. Crude oil and gold declined. Fed left rates on hold.

[R]4:0 PM New York – U.S. indexes extended losses following a global selloff after the benchmark index in Tokyo suffered its worst one day loss in 24 years. Rising tensions in Saudi Arabia and ongoing violence in Libya also added to market jitters. Crude oil and gold declined. Fed left rates on hold.[/R]

U.S. indexes extended losses on increasing concerns of a nuclear radiation leak reaching wider Japan after the third explosion at a nuclear power plant. The anxieties were also compounded after Saudi army marched in Bahrain after the ruler asked Gulf Cooperation Council members to intervene and prevent violent riots from spreading.

The U.S. indexes rebounded in the afternoon but failed to cut the losses below 1% and crude oil dropped more than 2% and the Fed left its stance on easy money unchanged and bond purchase plan intact. U.S. Fed voted to leave its short-term interest rate close to zero for an “extended period” and noted a slight improvement in consumer spending and employment.

European markets came under heavy pressure in the early opening after Germany decided to shut down at least seven plants that are 25 years or older.

Nasdaq in a partnership with the futures exchange ICE launched a bid for NYSE Euronext competing with the Deutsche Boerse.

In Europe economic news indicated mixed picture but investors focused on events in Japan. Euro area employment rose and Spanish home prices eased in the fourth quarter. German investor confidence deteriorated in March. French inflation slowed in February. Dutch retail sales and industrial production rose in January.

Markets in Germany plunged 5% at the opening and in Europe dropped more than 3% after Japan suffered its second worst one-day decline in 24 years. The IMF approved €4.1 billion disbursement to Greece. BMW, Renault, and Scor slumped.

The UK indexes slid after reports of radiation leakage from Japanese nuclear plants dragged commodities stocks. The UK leading index rose and home prices eased in January. Serco Group agreed to buy The Listening Company.

Tokyo suffered its second worst decline in stock market in 24 years as panicked investors sold stocks in the early morning after a third blast at the troubled nuclear power plant. The benchmark index plunged 14% before recovering to close down 10.6%. Toyota suspended at all 12 plants in Japan through March 16.

Stocks in Mumbai plunged more 2.7% at the opening but recovered to close down 1.3% after a panic selling in Japan sparked a selloff in Asia. Indian government needs to shed more light on its recently signed treaty with nuclear power plant makers on the safeguard provisions and liability assignments.

Stocks in Australia plunged in a regional sell off after Japan faced multiple crises. Prime Minister Kan warned of high level of radiation from a nuclear power plant and set off a panic that saw Nikkei index dropped to its second worst one-day loss of 14%.

Commodities, Bonds and Currencies

Yield on 10-year bond decreased to 3.31% and on 30-year bond decreased to 4.46%.

The U.S. dollar decreased to $1.4006 to a euro and decreased against the Japanese yen to 80.83 yen.

Immediate delivery futures of Texas crude oil decreased $3.74 to $97.45 a barrel, of natural gas increased 0.04 cents to $3.97 per mbtu and gasoline prices decreased 15.39 cents to 280.64 cents a gallon.

In metals trading, copper prices decreased 2.55 cents to $4.16 per pound, gold increased $30.70 to $1,394.40 per ounce and silver decreased $1.51 to $34.33.