Wall Street Retreats; France and Italy Debt Ratings Downgraded

Bikram Pandey
13 Jan, 2012
New York City

Stocks in New York retreated and the euro closed at a 16 month low on the renewed worries about the euro zone and weak earnings outlook from JP Morgan. Greece halted talks with lenders and France, Slovakia, Austria and Italy face a new round of rating downgrade.

[R]4:00 PM New York – Stocks in New York retreated and the euro closed at a 16 month low on the renewed worries about the euro zone and weak earnings outlook from JP Morgan. Greece halted talks with lenders and France, Slovakia, Austria and Italy face a new round of rating downgrade.[/R]

U.S. indexes drifted lower at the opening and stayed near the lows of the day in the afternoon on more euro zone worries and Greece and international lenders halted debt restructuring talks.

Market sentiment was weak at the opening after JPMorgan reported lower than expected earnings and U.S. trade deficit widened in November and imports prices slid in December.

In European trading, investors focused on the lack of interest at the bond auction of Italy though it yielded lower cost to the treasury. However, strong rumors of French debt downgrade by one notch were confirmed by finance minister Francois Baroin in a television interview.

Standard & Poor’s is expected to lower its debt opinion of Austria, Italy and Slovakia but Germany is expected to be spared according to sources at the debt opinion agency. Italian debt rating is expected to be cut to BBB+ from A according to the sources at the European Union.

In corporate news, Copano announced public offering of 5 million shares and priced at $34.03 and JPMorgan fourth quarter net slipped 23% to $3.73 billion but annual net increased 9%. JDA Software expects its revenue for fourth quarter at $173 million and Tractor Supply fourth quarter net sales increased 20% to $1.24 billion.

European markets gained after Italy sold €4.75 billion of debt today at lower yields. Japan based Inpex and France based Total SA finalized $34 billion Ichthys LNG Project in Australia. BMW and Daimler AG plan to ramp up production at U.S. plants and add 1,500 new jobs.

Greece and international lenders disagreed on debt restructuring that is expected cut payout to bond holders by 50% and lower its debt to GDP to 120% by 2020.

The UK indexes pared gains after early advances. Construction output rose but factory gate inflation eased in December. Invensys slumped 21% after weak fiscal year 2011 outlook.

Stocks in Japan gained today and added for the week on the positive momentum in the international markets. Exporters and auto makers gained after the yen edged lower. Inpex Corp finalized its investment in the $34 billion natural gas plant. Dentsu estimated 8.4% increase in December revenues.

Australian stocks advanced on the back of a rally in world markets. Miners, industrials and financials led the latest gains. For the week, the ASX 200 index increased 2.1%.

Commodities, Bonds and Currencies

The yield on 10-year U.S. bond decreased to 1.86% and 30-year bond closed unchanged at 2.97%.

The U.S. dollar edged up 1% to $1.268 to one euro and traded higher against the Japanese yen to 76.91. The euro fell to a 16-month low.

Immediate delivery futures of Texas crude oil decreased 20 cents to $98.90 a barrel and futures of natural gas fell 5 cents to $2.64 per mbtu and gasoline price increased 1.17 cent to 274.30 cents a gallon.

In metals trading, copper decreased 1 cent to $3.63 per pound, gold decreased $12.20 to $1,635.00 per ounce and silver decreased $0.58 to $30.16.