Financials Lift U.S. Indexes; Italy, Greece Worries in Rearview

Bikram Pandey
27 Jun, 2011
New York City

U.S. indexes rebounded after a weakness of seven of the last eight weeks. Banks closed higher after rule setting committee passed a watered down proposal to increase capital and delayed the implementation to between 2016 and 2018. European bond investors expand focus to Italy.

[R]4:00 PM New York – U.S. indexes rebounded after a weakness of seven of the last eight weeks. Banks closed higher after rule setting committee passed a watered down proposal to increase capital and delayed the implementation to between 2016 and 2018. European bond investors expand focus to Italy.[/R]

U.S. indexes traded higher after personal income edged up 0.3% in May lifting hopes that consumer spending may increase in the second half. Bank stocks rallied after intergovernmental organization supervising world banks approved less onerous capital increase.

The intergovernmental organization, generally referred to as Basel Committee on Banking Supervision that oversees world banking decided to increase capital requirements for banks between 1% and 2.5% and add a surcharge of 1% to banks that are facing highest risk related charges.

The watered down move agreed by banks is expected to be implemented between 2016 and 2018 and become fully effective in 2019. The delay in implementing these reforms will leave banks vulnerable if another world crisis develops in the next five years.

In deal news, S1 agreed to merge with Fundtech in $700 million stock swap. Metropolitan Health agreed to acquire Continucare for $416 million. U.S.-based Stanley Black & Decker offered to acquire Niscayah for $1.2 billion. Philips agreed to buy mammography equipment business for €57.5 million.

The European indexes traded sideways ahead of Greece’s austerity plan debate today. Italy, increasingly the focus of bond investors completed the sale of treasury bills that yielded 30 basis points higher at 1.988%.

Foreign direct investment in the European Union plunged 75% to €54 billion. Romania jobless rate rose in the first quarter. Finnish retail sales increased and Sweden trade surplus improved in May.

The UK indexes gained on optimism of a solution to the Greece debt crisis. The Greek Parliament begins a debate on the austerity measures today and a parliament vote is expected on Wednesday. The UK home prices declined in June.

Stocks in Japan closed lower as investors focused on the passage of Greek austerity measures. Banks declined on the worries that the failure to pass the measures may affect large banks around the world. Automakers gained after positive comments from Nissan.

Australian stocks declined tracking losses in Asia and international markets. Commodities fell and oil declined 1.2%. Banks led the decline on the worries that access to international wholesale markets may shrink if world economy falters.

Commodities, Bonds and Currencies

The 10-year U.S. bond yield increased to 2.90% and 30-year U.S. bond traded up to 4.34%.

The U.S. dollar decreased to $1.428 to one euro and rose against the Japanese yen to 80.89 yen.

Immediate delivery futures of Texas crude oil decreased $0.51 to $90.65 a barrel and futures of natural gas increased 0.04 cents to $4.26 per mbtu and gasoline price increased 2.75 cents to 280.41 cents a gallon.

In metals trading, copper fell 2.55 cents to $4.09 per pound, gold dropped $4.30 to $1,496.60 per ounce and silver decreased $1.09 to $33.56.