Second View on EU Summit Drags World Market Indexes

Bikram Pandey
12 Dec, 2011
New York City

U.S. indexes turned lower and dropped by 2% in the late afternoon after investors had second thoughts about the last week summit of European leaders. Chipmakers were on the decline after Intel lowered fourth quarter revenue outlook.

[R]4:05 PM New York – U.S. indexes turned lower and dropped by 2% in the late afternoon after investors had second thoughts about the last week summit of European leaders. Chipmakers were on the decline after Intel lowered fourth quarter revenue outlook. Two coal companies in Australia merged that was valued at $5 billion.[/R]

Stocks in New York and Europe declined market indexes dropped by 2% in the late afternoon as investors turned cautious and reacted to new warnings from ratings agencies.

Market decline was accelerated after a rating agency said it will review the European nations’ sovereign debt rating. Metals and energy prices fell more than 2% and gold plunged $47.70 an ounce.

European markets scaled back after investors reassessed last week’s European Union summit meeting and market jitters were heightened after Moody’s said it will review debt ratings of several euro zone nations. The bond market yields in Europe were on the rise and Italy completed the sale of debt auction at a lower yield.

The closely watched Italian 10-years bond yield rose 20 basis points to 6.5% and the yield on similar Spanish bond increased 3 basis points to 5.71%.

Italy also completed the sale of 7 billion of 1-year debt that yielded 5.95% compared to the 6.09% yield at the previous auction on November 10.

Stocks in Japan rebounded after falling for the last two trading sessions. The Nikkei index gained on the rising resources and exports sensitive stocks. Olympus jumped 8% as the company confirmed its plan to file revised financials by Wednesday.

Australian stocks gained following a rally in resource and banking sectors. The benchmark index added more than 1% after investors got the first chance to react to the pledge of the European leaders to meet tighter fiscal and financial guidelines.

Whitehaven Coal agreed to acquire Aston Resources in all stock deal for $2.8 billion. The two Australian coal companies have been in talks for more than a month and the deal creates one of the largest coal miners in Australia with a market value of $5 billion. Whitehaven said the combined companies will increase annual production to 25 million metric tons in 2016 from the 6 million tons of production in 2012.

Commodities, Bonds and Currencies

The yield on 10-year U.S. bond decreased to 2.02% and 30-year bond fell to 3.06%. the yield on German 10-year bonds declined 13 basis points to 2.01%.

The U.S. dollar gained 1.5% at $1.319 to one euro and closed lower against the Japanese yen to 77.90.

Immediate delivery futures of Texas crude oil increased $1.45 to $97.96 a barrel and futures of natural gas decreased 6 cent to $3.25 per mbtu and gasoline prices declined 2.2 cents to 257.39 cents a gallon.

In metals trading, copper decreased 10.4 cents to $3.45 per pound, gold fell $47.70 to $1,718 per ounce and silver fell $1.00 to $31.25.