Growing U.S. Economic Anxieties; Italy, Spain in Debt Contagion Fears

Bikram Pandey
03 Aug, 2011
New York City

The U.S. and world markets extended losses in the third week on the growing uncertainties about the U.S. economic health and euro-zone debt contagion. Italy and Spain are not in the direct focus of bond speculators. MasterCard Inc soared after transactions and payment through its network soared.

[R]4:00 PM New York – The U.S. and world markets extended losses in the third week on the growing uncertainties about the U.S. economic health and euro-zone debt contagion. Italy and Spain are not in the direct focus of bond speculators. MasterCard Inc soared after transactions and payment through its network soared.[/R]

The U.S. indexes extended losses on the ninth day in a row on the worries that the economy may slide into a recession and raised hopes of yet another stimulus.

U.S. private sector added 114,000 jobs in July according to a private sector but that failed allay the growing economic anxieties ahead of the monthly employment data from the government on Friday.

Earlier indexes gained after MasterCard, TimeWarner, Comcast and Clorox reported better than expected earnings.

Comcast second quarter income increased to $1.02 billion. Devon Energy second quarter income soared 288% to $2.7 billion. MasterCard second quarter income increased 33% to $608 million. Time Warner second quarter income rose to $638 million.

European markets extended losses to 10% in ten days as the debt stress resurfaced forcing Italian finance minister in an emergency meeting with the Bank of Italy and the prime minister of Spain to cut his vacation for the second day. Switzerland lowered its key rate to near zero.

Italy’s Prime Minister Silvio Berlusconi in his address to the parliament, on the last day before it reconvenes on September 12, urged the nation to act in unity and “confront difficulties.”

He stressed that at the time of confidence crisis “the markets overall are not evaluating correctly the merits of credit systems, investors’ evaluations of our bonds don’t take into proper accounts the strength of our banking system, the healthy asset base of our families and companies, measured foreign debt, the lack of imbalances in the real estate sector and the prudent budgetary policies.”

Japanese stocks headed lower following a worldwide sell-off. The U.S. debt accord failed to allay the long term debt worries and the stress in the euro-zone sovereign bond markets rose to a new high with Italy in focus. The yen flirted near a record high and the U.S. sales of Honda and Toyota lagged expectations.

Stocks in Australian declined sharply following the sell-off in the U.S. and European markets. Commodities declined but gold closed at a record high. Retail sales fell 0.1% in June but rose 0.3% in the second quarter. Australian trade surplus declined to A$2.05 billion in June on flat exports.

Commodities, Bonds and Currencies

The 10-year U.S. bond yield decreased to 2.60% and 30-year U.S. bond closed down at 3.87%.

The U.S. dollar decreased at $1.4317 to one euro and fell against the Japanese yen to 76.85 yen.

Immediate delivery futures of Texas crude oil decreased $1.91 to $91.88 a barrel and futures of natural gas decreased 0.06 cents to $4.09 per mbtu and gasoline price decreased 10.48 cents to 293.25 cents a gallon.

In metals trading, copper decreased 6.20 cents to $4.33 per pound, gold added $20.80 to $1,665.30 per ounce and silver increased $1.61 to $41.73.