Market Updates

World Markets in Bear Zone; Late Rally Erases U.S. Losses

Bikram Pandey
05 Oct, 2011
New York City

    The U.S. indexes recovered from the lows of 3% after the euro zone news raised the prospects of Greek debt default. Fed Chairman Bernanke noted slower than expected U.S. economic recovery and highlighted the sluggish job market. The euro declined to a nine-month low. Gold, copper and oil dropped 3%.

[R]6:00 PM, October 4, 2011, New York – The U.S. indexes recovered from the lows of 3% after the euro zone news raised the prospects of Greek debt default. Fed Chairman Bernanke noted slower than expected U.S. economic recovery and highlighted the sluggish job market. The euro declined to a nine-month low. Gold, copper and oil dropped at least 3%.[/R]

The U.S. indexes see-sawed and drifted lower in the afternoon but recovered from the 3% loss in the late rally. Oil, copper and gold dropped more than 3% and the euro hit a nine-month low against the dollar.

World markets deepened the losses in the bear zone with the indexes in Europe down more than 25%, indexes in Hong Kong declined 29% and in the U.S. dropped at least 11% in the year so far.

The U.S. indexes opened lower after Greek crisis engulfed market sentiment. European leaders announced another delay in disbursing latest tranche of bailout funds to Greece as the nation has so far not met all the conditions laid by the troika of international lenders.

The delay in the disbursements raised the prospect of the Greek default on its sovereign obligations as early as this month and may spark a contagion that policymakers may not be able to contain.

The fears of contagion drove the European indexes lower as much as 5%, the U.S. indexes down as much as 3% in the early trading and the yields on Italian, French and Spanish debts soared near recent highs.

The market sentiment improved after Federal Chairman Ben S. Bernanke made his comments to Congress’ Joint Economic Committee.

Bernanke noticed that the economic recovery is sluggish and the ongoing turmoil in the euro zone is weighing and added that the U.S. jobs market is likely to remain sluggish for some time. He also noted that generating a sustained economic growth is a shared responsibility of the Congress, the White House and the Fed.

Chairman also highlighted that the U.S. banks’ direct exposure to sovereign debts of Portugal, Spain and Greece was “minimal” and “manageable” but money market funds have “somewhat larger” exposure.

Banks in Europe led the decliners after Belgium based bank Dexia SA faces credit downgrade and plunged as much as 37% before recovering to close down 23%. The governments of France and Belgium may need to offer another bailout in less than three years to the bank.

In the economic news, the OECD area inflation climbed in August and Spanish jobless rate rose in September to 21.2%, a record high in the euro zone. Euro area producer price inflation eased but Romanian retail sales dropped in August. Greek retail sales declined in July.

The UK indexes plunged on the worsening sovereign debt crisis in Europe. The UK construction activity stagnated in September. Ireland's central bank lowered economic growth outlook for 2012. Wolseley swung to profit in fiscal year 2011.


Stocks in Japan declined on the rising worries in the euro zone and the yen rose to a decade-high against the euro. Markets in Hong Kong, India, Shanghai and Australia declined. Exports driven companies led the decliners.

Australian markets dropped nearly 1% on the weakening global scenario and rising tensions in the euro zone. Resources linked stocks closed lower. Reserve Bank of Australia left its key lending rate at 4.75%. Sundance Resources soars on a revised offer from Hanlong.

Commodities, Bonds and Currencies

The 10-year U.S. bond yield closed unchanged at 1.78% and 30-year U.S. bond increased to 2.76%.

The U.S. dollar increased to $1.324 to one euro and closed higher against the Japanese yen to 76.94 yen.

Immediate delivery futures of Texas crude oil decreased $1.93 to $75.68 a barrel and futures of natural gas increased 0.02 cents to $3.64 per mbtu and gasoline price decreased 2.05 cents to 249.05 cents a gallon.

In metals trading, copper decreased 9.70 cents to $3.05 per pound, gold plunged $56.20 or 3.4% to $1,601.50 per ounce and silver decreased $1.83 to $28.96.

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