World Markets Fall on Uncertain U.S., Europe Debt Outlook

Bikram Pandey
21 Nov, 2011
New York City

Global investors sold stocks as economic worries gathered momentum. European bonds yields continued to rise and banks led the decliners after Moody

[R]5:30 PM New York – Global investors sold stocks as economic worries gathered momentum. European bonds yields continued to rise and banks led the decliners after Moody’s issued a cautious note on French bonds. The trading sentiment in New York worsened after the debt panel failed to agree on a reduction plan.[/R]

U.S. indexes dropped on the rising economic worries at home and in Europe.

The U.S. is heading for automatic spending beginning in 2013 if lawmakers fail to agree before the deadline this Wednesday.

The debt panel was charged with the responsibility to devise a plan to trim debt as a part of the legislation to raise the debt ceiling earlier this year. The lawmakers have turned their focus to elections next year prompting the President Obama to get back to work on the economic issues.

The markets were unnerved that the automatic U.S. government spending will hit at the time when the Europe debt stress is expected to reach peak in the first quarter next year.

In corporate news, Gilead Sciences agreed to acquire Pharmasset for $11 billion and Transatlantic to combine with Alleghany in $3.4 billion transaction. Tech Data third quarter net income increased 6% to $53.5 million.

Across the Atlantic, European markets slumped more than 2% after Moody’s warned on the state of French bonds and Bundes Bank lowered economic outlook for the region. Spain’s Popular Party won a governing majority after a general election today but bond yield rose.

However, bonds lost most of the rally last week and yield on 10-year bond rose 17 points to 6.53% and spread to German bunds widened to 466 basis points. The yield last week traded at a record high of 6.74%.

In the economic news, the European Union agreed for a 2% rise in 2012 budget to €129 billion. Euro area current account balance swung to a surplus of €465 million but France''s leading economic index declined in September and Italian non-EU trade deficit narrowed in October. Bulgaria''s unemployment rate rose in the third quarter.

The UK indexes fell on the global economic outlook. The UK home prices declined in November and Ireland''s residential property price index fell in October. Centrica inked 10 year gas supply deal with Norway based Statoil ASA.

Stocks in Japan fell as exports in October declined and the nation swung to a deficit in the month. Bank of Japan said it purchase more stock index linked ETFs and REITs that will support equities prices. Shipping companies dropped to a new 10-year low and auto makers stocks dig deeper into losses in the year.

Australian stocks edged lower after international markets declined. Japan reported declining exports to Japan and China. Qantas and unions fail to agree ahead of today’s deadline and both sides will look for an industrial tribunal ruling.

Commodities, Bonds and Currencies

U.S. bonds yield on 10-year U.S. bond closed down at 1.97% and 30-year bond decreased to 2.95%.

The U.S. dollar rose 0.2% at $1.3491 to one euro and closed higher against the Japanese yen to 76.95.

Immediate delivery futures of Texas crude oil decreased $0.37 to $97.30 a barrel and futures of natural gas increased 9 cents to $3.41 per mbtu and gasoline prices increased 1.93 cents to 249.77 cents a gallon.

In metals trading, copper decreased 7.70 cents to $3.34 per pound, gold fell $41 to $1,684.10 per ounce and silver fell $0.72 to $31.76.