World Markets Sell-off Spreads on Weak German Debt Auction

Bikram Pandey
23 Nov, 2011
New York City

U.S. and world markets accelerated the decline as global economic uncertainty intensifies. The failure of German bond auction at near record low rates unnerved stock markets on both sides of the Atlantic. The latest batch of the U.S. economic data also painted a mixed picture.

[R]5:30 PM New York – U.S. and world markets accelerated the decline as global economic uncertainty intensifies. The failure of German bond auction at near record low rates unnerved stock markets on both sides of the Atlantic. The latest batch of the U.S. economic data also painted a mixed picture.[/R]

Investors sold stocks for the seven day in a row as indexes fell for the sixth day. The benchmark indexes S&P 500 and the Nasdaq declined to the lowest level in the month.

The two indexes have lost more than 8% in the month so far and are racing to test the lows reached in mid-October.

Market sentiment was weak in the early trading after durable goods orders declined and personal income and spending data were weaker than expected. The volatile economic data were released a day after the economic growth was revised lower.

In addition, in Europe, German debt auction failed to attract enough buyers as yields plunged to lows and a ratings agency warned that any external shock may affect the France’s ability to finance the rescue fund.

Germany failed to sell only 65% of €8 billion of in the latest auction.

The declines in indexes were across the board on both sides of the Atlantic as markets dropped between 1.9% and 3%. Milan, Spain and Norway plunged more than 2%.

The decline in the indexes was intensified after more banks in the region accessed short term loans from the European Central Bank. Hungary increased value-added tax to 27%, the highest in the European Union and France and Belgium wrangle over the bailout of Dexia.

Euro area private sector activity contracted and French business sentiment index fell in November. Industrial new orders in the euro area fell whereas Norway''s jobless rate remained steady in September.

The U.S. durable goods orders declined 0.7% in October, weekly jobless claims rose to 393,000, and mortgage demand eased. The Fed announced stress tests for banks that will cover 31 banks.

In corporate news, Merck agreed to pay $950 million to settle claims related to Vioxx. Deere & Co. fourth quarter net soared to $669.6 million. Eaton Vance fourth quarter net decreased to $46.8 million. New Jersey Resources fourth quarter net loss swung to $7.51 million. Valspar reported fourth quarter net income of $295.7 million.

The UK indexes dropped after mortgage approvals rose in October. The Bank of England policymakers were unanimous on maintaining the asset purchase program and leaving the key rate unchanged and debated the brewing debt contagion in Europe.

The benchmark index Nikkei in Tokyo trading declined to the lowest level since March 2009 as the high yen and persistent debt worries in the euro zone and the U.S. dented hopes of higher exports. Osaka Securities agreed to merge with the Tokyo Stock Exchange.

Australian stocks were under pressure after economic data from China, U.S. and Europe indicated a slow down. Australian construction work surged 12.5% in the quarter to September as miners accelerate capital spending. Virgin Blue said quarterly net rose.

Commodities, Bonds and Currencies

U.S. bonds yield on 10-year U.S. bond closed down at 1.88% and 30-year bond decreased to 2.84%.

The U.S. dollar rose 1.3% at $1.335 to one euro and closed higher against the Japanese yen to 77.35.

Immediate delivery futures of Texas crude oil decreased $2.13 to $95.88 a barrel and futures of natural gas increased 5 cents to $3.47 per mbtu and gasoline prices decreased 4.35 cents to 251.80 cents a gallon.

In metals trading, copper decreased 7.7 cents to $3.27 per pound, gold dropped $8.80 to $1,696.70 per ounce and silver fell $1.28 to $31.75.