Weekly Loss of 4% in S&P 500; Euro Looks to ECB

Bikram Pandey
18 Nov, 2011
New York City

The S&P 500 and Nasdaq indexes dropped 4% in the week. Global markets in the week lost as much as 5% in Europe and 3% in Asia. European leaders debate nearly two years after the crisis first erupted and the role of the European Central Bank and if it can lend directly to nations.

[R]4:40 PM New York – The S&P 500 and Nasdaq indexes dropped 4% in the week. Global markets in the week lost as much as 5% in Europe and 3% in Asia. European leaders debate nearly two years after the crisis first erupted if the European Central Bank can lend directly to nations.[/R]

U.S. stocks traded directionless as investors balanced the improving economic domestic sentiment and worsening yield picture in the euro zone.

U.S. debt cutting commission members harden their position as deadline looms to cut expenditures. The bi-partisan commission was appointed to cut ballooning deficit and out of control defense spending and rising medical and retirement entitlement charges.

In corporate news, Boeing secured $21.7 billion worth order from Indonesia-based Lion Air for 230 737 aircraft. The order was the single largest received by Boeing and President Barack Obama attended signing ceremony while attending a summit of Southeast Asian leaders.

In corporate news, H. J. Heinz second quarter net decreased to $237 million. Motorola Mobility stockholder approve proposed merger with Google. Marvell Technology third quarter net decreased to $195.1 million.

European indexes declined on worries about the debt contagion to bigger euro area countries. The Italian Prime Minister Mario Monti won a vote of confidence in the Senate. UBS outlined plans to expand its wealth management unit and cut 2,000 staff in investment banking unit.

Spanish Prime Minister Jose Luis Rodriguez Zapatero made a direct demand on the ECB and said on Thursday that “we transferred power” to the central bank so that “it defends the common policy and its countries”

Investors are increasingly factoring the role of the ECB in solving the current deadlock in the financial markets.

Rising yields in the bonds markets is making difficult for Spain, Greece and Italy to raise funds to fill budgetary holes or rollover debts, unless the central bank participates in supporting bonds of these nations.

In economic news, producer prices in Germany eased but in Portugal remained unchanged in October. Italy's current account deficit narrowed and industrial orders fell in September.

The UK indexes traded lower as European leaders struggle to increase the role of the central bank in direct lending to nations. Prime Minister David Cameron met with European leaders to press his case and resist the amendment to the Lisbon Treaty. The UK gross mortgage lending decreased 4% in October.

In Asia, stocks in Tokyo edged lower as exporters of electronics and automobiles battle near record strong yen, weak outlook in the euro zone and supply disruption linked to Thailand floods. Tokio Marine estimated flood related costs of $1.3 billion and Mitsui estimated $1.7 billion.

Australian stocks closed down on Friday and lost 2.8% in the week. Banks led the decliners on the worries that the turmoil in the euro zone may curb access to wholesale funding of $100 billion. Rio Tinto increased its offer for Canada based Hathor Exploration to $636 million.

Commodities, Bonds and Currencies

Commodities sold off between 3% and 6%.

U.S. bonds yield on 10-year U.S. bond closed up at 2.01% and 30-year bond increased to 2.99%.

The U.S. dollar fell 0.05% at $1.351 to one euro and closed lower against the Japanese yen to 76.86.

Immediate delivery futures of Texas crude oil decreased $1.41 to $97.41 a barrel and futures of natural gas decreased 9 cents to $3.31 per mbtu and gasoline prices decreased 1.83 cents to 248.90 cents a gallon.

In metals trading, copper increased 2.05 cents to $3.42 per pound, gold rose $4.60 to $1,724.80 per ounce and silver gained $0.76 to $32.26.