World Markets Waver Ahead of EU Summit and Rate Decision

Bikram Pandey
07 Dec, 2011
New York City

U.S. stocks wavered as investors focused on the 2-day summit of European leaders and a possible rate cut on Thursday by the European Central Bank. Commodities gyrated and bond yields trended higher in New York and Europe. The entire board at Olympus is expected to resign.

[R]4:30 PM New York – U.S. stocks wavered as investors focused on the 2-day summit of European leaders and a possible rate cut on Thursday by the European Central Bank. Commodities gyrated and bond yields trended higher in New York and Europe. The entire board at Olympus is expected to resign.[/R]

The U.S. indexes turned lower ahead of the two-day euro area summit starting tomorrow in Brussels as the prospect of a deal among the member nations receded.

German officials played down the prospect of an immediate agreement to set up a second rescue fund and increase the available capital to €1 trillion as member nations prepare to gather for a summit. However, the summit is convened to expedite the fiscal union in the region and agree on penalty to nations that do not target fiscal discipline.

Tensions were running high ahead of the summit even though politicians put up brave faces. The latest data from the Bank of Italy showed that Italian banks sought the help of the European Central Bank to borrow €153.2 billion in November up from €111.3 billion in October and sharply more than €41.3 billion borrowed in June.

In addition, banks in Spain, Portugal, Greece and Ireland and to an extent France were forced to reach out to the lender of last resort, the European Central Bank. Today, Germany completed a short-term bond offering that raised more than €4 billion at a yield higher than the previous auction.

Euro zone banks also accessed the central bank to get dollar liquidity after the U.S. based money market funds curtailed their lending. The banks in the zone borrowed €50 billion from the central bank using its first dollar funding operation in nearly three years. French banks were the largest borrowers from the facility according to the sources in London and Brussels.

The ECB is also expected to cut its reference rate by 25 basis points on Thursday and offer measures to expand lending collateral and longer dated loans.

In corporate news, Citigroup edged lower and banks declined after the third largest bank said it will take $400 million charge and eliminate 4,500 positions. Dollar General said controlling shareholders plan to cut stake to 53.7%. J.C. Penney takes a stake in Martha Stewart Living.

In economic news, French trade deficit declined and German industrial production rebounded in October. Swiss jobless rate remained unchanged in November. Norway's current account surplus rose in the third quarter.

The UK indexes declined on the worries that more banks may be downgraded. The industrial and manufacturing production in UK declined more than estimated in October and shop price inflation eased to a one-year low in November. Kesa Electricals plunged 7.5%.

The Nikkei in Tokyo advanced and closed at one-month high following positive sentiment in Asian markets. Trading volume surged and resources linked companies and banks led the gainers. Mitsui O.S.K. agreed to form a joint venture with Danish and Singaporean partners to operate oil supertanker services.

Commodities, Bonds and Currencies

U.S. bonds yield on 10-year U.S. bond closed down to 2.04% and 30-year bond yielded at 3.08%.

The U.S. dollar eased 0.07% at $1.341 to one euro and closed lower against the Japanese yen to 77.67.

Immediate delivery futures of Texas crude oil decreased $0.33 to $100.95 a barrel and futures of natural gas decreased 7 cent to $3.41 per mbtu and gasoline prices decreased 4.69 cents to 259.85 cents a gallon.

In metals trading, copper decreased 2.3 cents to $3.55 per pound, gold added $12.70 to $1,744.50 per ounce and silver fell $0.11 to $32.62.