Wall Street in Lackluster Trading; Slovakia Rejects Rescue Fund Expansion

Bikram Pandey
11 Oct, 2011
New York City

U.S. stocks drifted and investors digested promises of quick resolution to the banking recapitalization plan in the euro zone. Slovakian lawmakers rejected the measure to expand the rescue fund and also triggered the fall of the coalition government.

[R]4:50 PM New York – U.S. stocks drifted and investors digested promises of quick resolution to the banking recapitalization plan in the euro zone. Slovakian lawmakers rejected the measure to expand the rescue fund and also triggered the fall of the coalition government.[/R]

Stocks in New York traded sideways as European leaders set the deadline of October 23 to announce bank recapitalization plan and Slovakia rejected the plan to expand the rescue fund.

Slovakian parliament after the U.S. market close rejected the measure to expand the 440 billion euros rescue fund. Of the 124 members only 55 backed the measure, far less than required majority of 76. The rejection also led the fall of the current four member coalition government.

No date has been set for a new vote with the interim government in place.

Stocks in early trading in New York were lackluster after European Central Bank President Jean Claude Trichet told European lawmakers that debt crisis has advanced from “smaller nations to larger countries” and is “systemic” and must be tackled “decisively.”

The outgoing president also struck a nerve after he stressed that the risk of debt contagion is real and could threaten the euro and must be contained.

In the U.S. earnings, 99 Cents Only agreed to be acquired by Ares Management and Canada Pension Plan and Dollar Thrifty declined 2% after it decided to remain independent after eighteen months of searching for a buyer. America Airlines plans to cut its capacity by 3% in the current quarter.

European markets closed lower as Slovakian lawmakers debated to approve the expansion of the European rescue fund. Slovakian prime minister may be forced after she tied the future of the government with the approval vote.

The government of four coalition members is likely to fall if the nation of 5 million people decides not to expand the rescue fund. However, the opposition party leader said the measure can be brought to the vote again later in the week and has a higher chance of passage with the newly placed interim government.

Greece said inspectors from troika completed their mission and approved the release of sixth tranche of aid. However, German finance ministry spokesperson the release of 8 billion euros aid is not certain.

A Ukrainian court convicted former prime minister Yulia Tymoshenko and sentenced for seven years. Russian president Putin and EU foreign ministry condemned the ruling and said it appears to “selective” application of the law.

Stocks in Japan soared after a 3-day weekend. Current account surplus declined for the sixth month in a row to $5.3 billion. Toyota sales in China increased 11% in September and Takashimaya Corp revised earnings outlook and Nidec increased its share buyback plan.

Australian stocks for the fifth day in a row and resource stocks led the gainers. The Australian dollar traded above parity with the U.S. dollar in intra-day trading. Banks gained and resource linked stocks closed mixed.

Commodities, Bonds and Currencies

The yield on 10-year U.S. bond closed up to 2.16% and 30-year bond increased to 3.11%.

The U.S. dollar decreased to $1.368 to one euro and closed lower against the Japanese yen to 76.659 yen.

Immediate delivery futures of Texas crude oil increased $0.40 to $85.81 a barrel and futures of natural gas increased 0.06 cents to $3.60 per mbtu and gasoline price increased 5.67 cents to 275.20 cents a gallon.

In metals trading, copper decreased 7.65 cents to $3.29 per pound, gold decreased $4.10 to $1,666.70 per ounce and silver increased $0.23 to $33.21.