U.S. Indexes Decline After Early Gains; Portugal Debt Lowered to Junk

Bikram Pandey
05 Jul, 2011
New York City

U.S. stocks closed nearly unchanged as gold and oil rebounded 2%. More than $12 billion worth of deals were announced. Peripheral nations in the euro-zone dominated the market sentiment. Portugal debt rating was lowered to junk status by a rating agency.

[R]4:30 PM New York – U.S. stocks closed nearly unchanged as gold and oil rebounded 2%. More than $12 billion worth of deals were announced. Peripheral nations in the euro-zone dominated the market sentiment. Portugal debt rating was lowered to junk status by a rating agency.[/R]

U.S. indexes fluctuated after the release of factory goods orders report. Crude oil rose to a 3-week high and gold traded above $1,500. Indexes hugged near unchanged mark for most of the day in the backdrop of the uncertainty in the euro-zone and China.

Peripheral euro-zone nations’ debt worries were compounded by the rising real estate debt exposure of Chinese banks. In addition, U.S. banks are still struggling with falling real estate prices and stalled foreclosures.

In the deal news, Energy Transfer agreed to acquire Southern Union for $8.9 billion. Immucor entered in a leveraged buyout deal with fund controlled by TPG Capital for $1.97 billion and Western Union agreed to buy Travelex Global Business Payments for £606 million.

Across the Atlantic, European indexes traded sideways as investors focus on the next bailout conditions for Greece. U.S. based OM Group agreed to purchase Vacuumschmelze for €700 million. Total SA raised its equity stake in the Tempa Rossa field to 75%.

Inflation in the OECD region surged in May on high food and energy prices. Private sector activity growth in the euro area slowed in June and retail sales declined 1.1% in May. Swedish central bank hiked key rate by 25 basis points.

The UK indexes edged higher after service sector activity improved marginally and Irish service sector grew in June. Tullow surged 3.1% after estimating revenue of about $1.05 billion for the first-half.

Stocks in Japan closed higher for the sixth day in a row prompting worries that market rally may not be supported by fundamentals. The latest spurt was driven by the mildly optimistic regional economic survey released by the Bank of Japan.

Australian stocks traded lower after the Reserve Bank of Australia left its key lending rate at 4.75% and offered a benign view on inflation. The rate decision was widely anticipated but the outlook on inflation prompted a slower economic expansion outlook for the rest of the year.

Commodities, Bonds and Currencies

The 10-year U.S. bond yield decreased to 3.12% and 30-year U.S. bond traded increased to 4.37%.

The U.S. dollar increased at $1.4421 to one euro and gained against the Japanese yen to 81.05 yen.

Immediate delivery futures of Texas crude oil increased $1.97 to $96.91 a barrel and futures of natural gas increased 0.04 cents to $4.35 per mbtu and gasoline price increased 0.66 cents to 297.92 cents a gallon.

In metals trading, copper increased 3.6 cents to $4.33 per pound, gold soared $33.50 to $1,516.10 per ounce and silver increased $1.88 to $35.59.