World Markets in Holding Pattern; European Banks Slide

Bikram Pandey
13 Dec, 2011
New York City

World markets were in a holding pattern as the European banks sell assets to meet revised capital guidelines. Greece is expected to extend recession to the fifth year in 2012 as construction industry collapses. U.S. retailers and consumer spending linked stocks traded lower.

[R]1:30 PM New York – World markets were in a holding pattern as the European banks sell assets to meet revised capital guidelines. Greece is expected to extend recession to the fifth year in 2012 as construction industry collapses. U.S. retailers and consumer spending linked stocks traded lower after weaker than expected November retail sales.[/R]

World markets were in a holding pattern as the European Union nations begin to implement budgetary reforms agreed last week and U.S. retail sales in November rose at the slowest pace in five months.

U.S. stocks traded sideways ahead of the Fed statement this afternoon and retail sales in November rose at the slowest month since June. Best Buy dropped 12% after the electronics retailer reported weaker sales and 29% fall in earnings.

The commodities traded sideways but crude oil futures jumped to trade near $100 a barrel and copper and silver, gold and copper edged lower.

Trading was cautious in bond markets in Europe and in New York and the yields on 10-years of bonds of Italy and Spain increased. The European rescue fund completed its short term bond offering that drew strong interest from investors.

European markets traded sideways as several of fiscal compact agreement provisions went effective today. Yields on Italian, Spanish and Irish bonds closed higher but slightly lower than the record set a month ago.

Greece’s deficit is expected to exceed its target as tax collection lags and economy faces recession for the fourth year in a row.

Greece said its tax revenues in the eleven months to November declined just over 3% from a year ago period and budget deficit is expected to reach 10%, higher than the previous estimate. The budget deficit was 10.6% of GDP in 2010 and Greek economy is expected shrink more than 5% in the current year and the recession is expected to extend to the fifth year in 2012.

Construction spending plunged 38% in the ten months to September from a year ago period.

The benchmark index in Tokyo closed lower after investors reassessed the EU summit fiscal compact failed to produce immediate and specific steps to contain debt contagion. Honda declined on the worries that it may lower its annual earnings outlook. Olympus is set to file its revised financial statements.

Australian exports of commodities in the current fiscal year is estimated to increase 15% to $206 billion on 13% increase in iron ore and 14% rise in thermal coal exports. Stocks edged lower on the euro zone worries and a weakness in the international markets.

Commodities, Bonds and Currencies

The yield on 10-year U.S. bond increased to 2.04% and 30-year bond rose to 3.08%.

The U.S. dollar gained 0.8% at $1.307 to one euro and traded higher against the Japanese yen to 77.92.

Immediate delivery futures of Texas crude oil increased $2.00 to $99.77 a barrel and futures of natural gas increased 0.1 cent to $3.25 per mbtu and gasoline price gained 5.7 cents to 262.08 cents a gallon.

In metals trading, copper decreased 2.9 cents to $3.43 per pound, gold fell $6.80 to $1,661 per ounce and silver fell $0.15 to $31.16.