U.S. Stocks Struggle, Greek Contagion Worries

Bikram Pandey
16 Jun, 2011
New York City

U.S. stocks meandered as investors digested slightly better news on the jobs and housing market after a string of weak economic data. Greece remained the focus as prime minister sought to unify the nation for austerity measures. India lifted rates for the tenth time in last sixteen months.

[R]4:00 PM New York – U.S. stocks meandered as investors digested slightly better news on the jobs and housing market after a string of weak economic data. Greece remained the focus as prime minister sought to unify the nation for austerity measures. India lifted rates for the tenth time in last sixteen months as inflation nears 9%.[/R]

U.S. indexes rose after weekly jobless claims fell 16,000 and housing starts rose 3.5% in May. The positive news on the jobs market and housing front set the tone at the opening and technical rebound was also expected to drive indexes higher after a loss of nearly 2% yesterday.

Investors also took a note of a statement from the International Monetary Fund that the agency will help Greece as the nation muddles through its recent debt problem while the bailout conditions are finalized. The International Energy Agency lifted global oil demand growth forecast for 2011 indicating a sustained demand in Asia.

In deals news, Energy Transfer agreed to buy Southern Union for $7.9 billion. Ford planned addition investment of $500 million to increase engine production in China and the U.S. based Terex Corp agreed to acquire Germany based Demag Cranes for a sweetened bid of $1.4 billion.

The European indexes slumped on ongoing concerns in Greece. Euro-zone annual inflation eased to 2.7% in May and employment remained flat in the first quarter. The jobless rate in Greece surged in the first quarter to 15.9%. Switzerland left key rate unchanged at 0.25% and Dutch retail sales improved in April.

The euro declined for the third day in a row and totalled losses to 2% against the dollar.

The UK indexes edged lower on euro debt concerns and political strife in Greece. UK retail sales fell in May. Rolls-Royce secured orders worth over £100 million to supply propulsion systems. Mulberry Group soared 10.5% after fiscal year 2011 revenue surged 69% to £121.64 million.

Stocks in Japan closed lower tracking losses in New York and European markets. Greek worries and uneven economic recovery in the U.S. dragged market indexes. Greek troubles intensified as riots broke out in Athens and European leaders struggle to decide the share of losses in the event of Greek bond restructuring.

Reserve Bank of India increased key lending rate by 0.25% to 7.25% and cited inflationary pressures from the commodities prices. The benchmark indexes in Mumbai trading dropped 0.8% and market leader Reliance Industries fell 1.4% to one-year low and down 16% in the last 52-week of trading.

The Australian index dropped 1.9% following the sharp decline in New York. Asian markets declined more than 1% tracking losses in Europe as focus shifted to Greek troubles. The European leaders and the ECB failed to agree on second bailout terms for Greece.

Commodities, Bonds and Currencies

The 10-year bond yield decreased to 2.91% and 30-year bond closed down to 4.17%.

The U.S. dollar increased to $1.415 to a euro and rose against the Japanese yen to 80.70 yen.

Immediate delivery futures of Texas crude oil decreased $0.45 to $94.81 a barrel and futures of natural gas fell 0.15 cents to $4.42 per mbtu and gasoline price rose 3.5 cents to 295.86 cents a gallon.

In metals trading, copper fell 0.35 cents to $4.13 per pound, gold gained $3.10 to $1,529.30 per ounce and silver increased $0.01 to $35.42.