Weekly Drop of 8% on Wall Street; Euro Zone Donwngrades

Bikram Pandey
25 Nov, 2011
New York City

U.S. stocks traded sideways in a shorter trading session but sovereign debt yield in Europe rose. Ratings agencies lowered debt ratings of Hungary to below investment grade and by one notch for Belgium. The euro declined for the third day in a row.

[R]4:15 PM New York – U.S. stocks traded sideways in a shorter trading session but sovereign debt yield in Europe rose. Ratings agencies lowered debt ratings of Hungary to below investment grade and by one notch for Belgium. The euro declined for the third day in a row.[/R]

The U.S. stocks traded sideways and trading volumes dropped to the lowest in the year as most traders were away for Thanksgiving holiday.

Stocks in resources, energy, healthcare and energy sectors led the decliners and financials and utilities closed higher.

However, investors focused on the rising debt stress in Europe. Italy managed to complete its debt auction that drew a strong response but at a significantly higher yields.

The Italian Treasury sold €8 billion of 6-month bills that yielded 6.504%, higher than 3.5% yield a month ago. Italy also sold €2 billion zero coupon CTZ bonds at a record yield of 7.8%, up from 4.6% from the previous sale.

Spanish 10-year bonds yields rose 6 basis points to 6.68%, French 10-year yields declined six basis points to 3.63%, Italian yields rose 19 basis points to 7.3% and Irish bond yield rose 13 points to 9.36%.

Italy still plans to rollover debts and raise new debts totaling €440 billion in 2012, according to the debt management office.

However debt downgrade continued in Europe. Standard & Poor’s cut long term sovereign credit rating to AA from AA+ after Fitch cut Portugal’s debt rating to junk status on Thursday.

Moody’s lowered Hungary’s sovereign long term debt rating to below investment grade and to the highest level of junk rating. Hungary lost its investment grade rating for the first time in 15 years.

Sources close to Greek debt management office confirmed that the nation is looking for a higher than agreed upon losses to avoid disorderly default.

Stocks in Tokyo trading declined and the benchmark Nikkei index dropped 2.6% in the week and plunged 20% in the year so far. Nikon began replacing parts made elsewhere after it shuttered Thai factory and Nintendo edged up on robust sales of hand held game devices.

Australian stocks declined on the growing euro zone worries and weak commodities prices. Australian completed the sale of $700 million of 5-year bonds that yielded 3.25%. The yield on 10-year bond declined to the low last seen in March 2009. Woodside Petroleum declined after new natural gas wells failed to deliver.

Commodities, Bonds and Currencies

U.S. bonds yield on 10-year U.S. bond closed up at 1.96% and 30-year bond increased to 2.92%. The U.S. 10-year bond yield dropped to a six decade low in September at 1.67%.

The U.S. dollar rose 0.8% at $1.323 to one euro and closed higher against the Japanese yen to 77.74.

Immediate delivery futures of Texas crude oil increased $0.60 to $96.77 a barrel and futures of natural gas increased 8 cents to $3.54 per mbtu and gasoline prices decreased 6.88 cents to 244.89 cents a gallon.

In metals trading, copper increased 15 cents to $3.29 per pound, gold dropped $15.10 to $1,683.70 per ounce and silver fell $0.93 to $31.05.