U.S. Economic Data Lift Indexes; 'Escalating Crisis' in Euro Zone

Bikram Pandey
15 Dec, 2011
New York City

Global markets edged higher after U.S. economic news lifted sentiment. Michael Kors Holdings Ltd public offering surged 21% on the first day of trading and raised $944 million. IMF managing director said crisis in the euro zone will need help from nations outside the region.

[R]5:30 PM New York – Global markets edged higher after U.S. economic news lifted sentiment. Michael Kors Holdings Ltd public offering surged 21% on the first day of trading and raised $944 million. IMF managing director said crisis in the euro zone will need help from nations outside the region. Metals continued to slide for the third day in a row.[/R]

U.S. investors focused on domestic economic data and stocks edged higher after weekly jobless claims declined to 40-month low and producer price index increase was within the Fed’s target.

However, the news related to Europe was less positive as the managing director of the International Monetary Fund, Christine Lagarde said at a meeting in Washington that the crisis in the euro zone is “unfolding and escalating” and went on to add that it will need help from outside the region.

Lagarde has been active in looking for ways to offer help to the struggling nations in the euro zone but the IMF was less than helpful when similar crisis erupted in Asia and in Russia in the late nineties. The European bias built in the IMF has raised questions about the focus of the bank and its charter.

The U.S. indexes gained after weekly jobless claims fell to 366,000, producer price index rose 0.3% and foreclosure filings declined 14% in November.

In corporate news, Lam Research agreed to acquire Novellus for $3.3 billion and Fujifilm agreed to buy SonoSite for $995 million.

Michael Kors Holdings Ltd sold 47.2 million shares in a public offering that raised $944 million or $20 a share in New York. Michael Kors himself planned to cut his stake in the company from 12% to 8.6% and the largest shareholder Sportswear Holdings Ltd lowered its stake from 52% to 38% stake.

European indexes gained after Spain raised €6.03 billion from bond auction today and the euro rebounded and a ratings agency downgraded five European banks on deteriorating sovereign debt crisis. Credit Agricole planned to cut 2350 jobs. Old Mutual proposed selling its Nordic business for £2.1 billion.

Employment in the euro area fell in the third quarter. German private sector improved but French private sector output stagnated in December. Swedish unemployment rate dropped in November to 6.7% and Dutch jobless rate held at 5.8%.

The UK indexes advanced after retail sales volume declined and Ireland's manufacturing price inflation eased in November. UK inflation expectations for the year ahead eased in November.

Stocks in Tokyo extended losses for the second day in a row after the latest quarterly survey of big businesses showed a fall in confidence. Large businesses also plan to cut capital expenditure in the quarter ahead. Ocean freight companies dropped to the lows of the year after rates fell on the Asia-Europe route. Olympus dropped 20%.

Australian stocks extended losses for the third day in a row as commodities plunged in Asian markets. Silver tumbled 8%, copper fell more than 6% and gold declined 5%. Australian banks reiterate their lack of willingness to pass on future rate hikes as profits soar to record high.

Commodities, Bonds and Currencies

The yield on 10-year U.S. bond decreased to 1.90% and 30-year bond inched up to 2.91%.

The U.S. dollar fell 0.3% at $1.302 to one euro and traded lower against the Japanese yen to 77.93.

Immediate delivery futures of Texas crude oil dropped $1.51 to $93.44 a barrel and futures of natural gas decreased 0.8 cent to $3.12 per mbtu and gasoline price fell 1.3 cents to 249.08 cents a gallon.

In metals trading, copper decreased 1.7 cents to $3.26 per pound, gold fell $16.10 to $1,570 per ounce and silver rose $0.16 to $29.34.