Greek Worries Spark Global Selloff, Oil Below $90

Bikram Pandey
23 May, 2012
New York City

World markets felt the pain of the rising probabilities of Greek exit from the euro zone as leaders in Europe gather. The widespread loss around the globe dragged indexes in the U.S. down 1.5% and in Europe between 2% and 3.6%. Oil and gold fell and yields of German and U.S. bonds dropped near lows.

[R]4:00 PM New York – World markets felt the pain of rising probabilities of Greek exit from the euro zone as the leaders in Europe gather to discuss contingency plans. The widespread loss around the globe dragged U.S. indexes down more than 1.5% and European indexes between 2% and 3.6%. Crude oil and gold fell and yields of Germany and U.S. Treasuries declined.[/R]

Stocks, bonds, commodities and currency markets were roiled as European leaders gather in Brussels to discuss Greek contagion and prepare for contingency plans.

The financial markets were roiled around the world and German bond auction of 5 billion euros was completed at a near zero yield and the U.S. Treasury auction of $35 billion in the afternoon fetched 1.71% yield, near six decade low.

The fears of Greek exit from the euro zone were widely discussed on the trading desks around the world after former Greek Prime Minister Lucas Papademos comments sapped market optimism ahead of the summit today.

Papademos said the risks of exit are real and would have “catastrophic” economic consequences for Greece and may have far reaching implications for the currency union.

European leaders of the 27 nations in the European Union are gathering today in Brussles to make contingency plans but expectations of any resolutions are low as the leaders are expected meet again at the end of June and after the Greek elections.

In economic news, U.S. new home sales in April increased 3.3% from March to a seasonally adjusted rate of 343,000 according to a government agency and median home price rose slightly to $235,700. A day ago, industry association reported sale of previously owned homes increased 3.4% in the month to a seasonally adjusted annual rate of 4.62 million.

In stock trading, technology and financial stocks led the decliners and the two popular indexes, S&P 500 and the Nasdaq fell, dropped as much as 1.6%.

The indexes in Europe plunged ahead of the meeting, the euro eased to the low of the year and the bond yields in Spain and Italy rose and German bond yield essentially yielded near zero as investors chose the safety of the principal over the rates.

The index in London dropped 2.5%, in Paris fell 2.6%, in Frankfurt declined 2.3%, in Milan plunged 3.7% and in Madrid slumped 3.3%. The index in Zurich fell 1.6% and in Stockholm fell 2.6%.

Google completed acquisition of Motorola Mobility. Scotiabank agreed to sell Scotia Plaza for approximately $1.27 billion.

American Eagle first quarter net rose 6% and the retailer lifted outlook. Analog Devices second quarter net plunged 33% on weak revenue. Bank of Montreal second quarter net soared 27% to $1.03 billion. Dell first quarter net declined 33% to $635 million.

The European indexes slumped 2% as European leaders gather in Brussels to discuss Greece and possible growth measures and consumer sentiment in Italy dropped to the lowest on record. The UK retail sales fell in April. Cove Energy accepted £1.22 billion PTTEP takeover offer trumping the bid from Royal Dutch Shell.

Stocks in Japan fell sharply after the central bank left its interest rate range and asset purchase program intact but shifted its stance from the monetary policy easing. Exporters and automakers fell. Mazda Motor Corp gained on the prospect of a strategic deal with Fiat SpA.

Australian stocks fell on the rising worries in the euro zone and faltering growth of imports from China. Australian dollar declined to a new low for the year. Myer slumped 8% after the retailer reported weaker than expected sales and earnings and lowered its annual outlook.

Commodities, Bonds and Currencies

The yields on 10-year U.S. bond decreased to 1.71% and 30-year U.S. bond edged lower to 2.79%.

The U.S. dollar edged up to $1.257 to one euro and gained against the Japanese yen to 79.43 in New York trading.

Immediate delivery futures of Texas crude oil decreased $1.86 to $89.90 a barrel and Brent crude futures fell $2.85 to $105.56. Futures of natural gas increased 0.02 cents to $2.72 per mbtu and gasoline price decreased 6.46 cents to 287.23 cents a gallon.

In metals trading, copper decreased 7.6 cents to $3.41 per pound, gold decreased $26.00 to $1,550.60 per ounce and silver decreased 57 cents to $27.63.