Market Updates
U.S. Stocks Rebound; European Markets Focus on Greece
Devan Biswas
23 Sep, 2011
New York City
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U.S. stocks rebounded after a two-day selloff that knocked off 7% from indexes. U.S. Treasury yield on 10-year bond increased to 1.77% and the dollar edged higher. Greece remained in focus in European trading. Hewlett Packard declined after investors disagreed with the appointment of Whitman.
[R]12:15 PM New York – U.S. stocks rebounded after a two-day selloff that knocked off 7% from indexes. U.S. Treasury yield on 10-year bond increased to 1.77% and the dollar edged higher. Greece remained in focus in European trading. Hewlett Packard declined after investors disagreed with the appointment of Meg Whitman as the next chief executive.[/R]
U.S. indexes rebounded after a sharp 2-day fall that knocked off 7%.
The decline in last two days spared only dollar and the U.S. Treasury bonds. But, every other publicly traded instrument suffered a decline. Investors are increasingly convinced that policy makers have run out of options to support the economies of the Europe and the U.S.
Commodities like copper, gold, silver, stocks and currencies expect dollar fell in the 2-day rout. The S&P 500 index increased 6.10 or 0.5% to 1,136 and declined 6.6% in the week.
Market fears gripped investors after Fed offered no new plan to stimulate the economy and political gridlock continues in Washington. European policy makers are still struggling to offer a policy response as Greece faces daunting tasks to balance the budget even after the 8 billion euros bailout scheduled in the early October.
Talks of a possible Greek debt default dragged European market indexes as much as 3% in the early trading. The talks of debt cuts in Washington also contributed to market jitters as politicians shift their focus away from job creations and record high unemployment.
European markets extended their losses for the third day in a row after a statement from G20 failed to offer new insights. The indexes began their slide in the early morning and gathered downward momentum in the afternoon but reversed the course after the New York market opening.
On late Thursday evening Group of 20 nations issued a joint communiqué that reiterated their commitment to the stability of financial markets and world banking system. However, the statement lacked fire power to convince investors and offered no new initiatives or concrete actions.
Markets indexes in France and Germany tested lows last seen in 2009 but rebounded in the late evening and trimmed losses to a fraction. The market indexes in Athens declined 2.4%, in Milan fell 2.6%, in Stockholm dropped 3% and in Spain edged down 2.3% but recovered at close.
European banks faced another round of sell off after comments from Greek finance ministers at a meeting of G20 nations in Washington and annual meeting of World Bank and the International Monetary Fund only added to confusion.
U.S. top 10 money market funds lowered their exposure to Europe in August 8% from July according to the latest data released by the rating agency Fitch. The funds lowered exposure by 27% from May 2011
U.S. money market funds hold 42.1% of $676 billion in European bank debt compared to 47.2% of $658 billion in July. The funds also lowered their exposure to French banks and increased to French certificates of deposits with maturities of seven days or fewer.
The time for Greek bailout is quickly closing and market jitters are on the rise. Greece is focused on implementing another round of austerity measures that will trim government payroll by 30,000 and freeze pensions and raise taxes.
However, Greece is still expected to generate deficit in the current and the next year before it can balance its budget in 2013, even when the country is exempted from loan repayments for the next two years.
Greek bond yields are forecasting that banks may have to agree on much higher losses than the 21% loss agreed in the swap that is expected to be completed in mid-October after the release of 8 billion euros tranche of bailout.
In Asian markets, export sensitive countries’ indexes led the decliners in the region. Market indexes in Hong Kong extended losses by 1.4% and decline to 6.2% in two days and in India losses accumulated to 5.3% after 1.2% loss today.
Markets in Tokyo were closed today and the index in the export driven economies like South Korea plunged 5.7% and in Taiwan declined 3.6%.
U.S. Stock Movers
KB Home ((KBH)) rose 0.3% or 2 cents to $5.74 after the homebuilder company said third quarter revenues decreased 27% to $367.3 million from $501.0 million in the same quarter last year. Net loss in the quarter widened to $9.6 million or 13 cents per diluted share compared to $1.4 million or 2 cents per share a year ago period.
Nike, Inc. ((NIKE)) increased 4.7% or $4.03 to $88.21 after the footwear maker reported first quarter revenue soared 18% to $6.1 billion from $5.2 billion in the same quarter last year. Net income in the quarter increased 15% to $645 million or $1.36 per diluted share compared to $559 million or $1.14 per share a year ago.
The Mosaic Company ((MOS)) decreased 5.2% or $3.13 to $56.98 after the agriculture products maker preliminary first quarter revenue soared 41% to $3.1 billion from $2.2 billion in the same quarter last year. Net earnings in the quarter surged 77% to $526 million or $1.17 per diluted share compared to $297.7 million or $0.69 per share a year ago.
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