Losses Accumulate in Global Markets, S&P 500 Down 10% from Peak

Bikram Pandey
04 Jun, 2012
New York City

U.S. markets extended losses after G7 finance ministers announced emergency meeting tomorrow to discuss widening euro zone debt crisis. The benchmark index fell 10% from its peak in April. Commodities declined for the fifth week in a row and crude oil prices fell to a new low.

[R]4:00 PM New York – U.S. markets extended losses and G7 finance ministers are scheduled to hold an emergency meeting tomorrow to discuss the widening euro zone debt crisis. The benchmark index fell 10% from its peak in April. Commodities declined for the fifth week in a row and crude oil prices fell to a new yearly low.[/R]

Stocks on Wall Street fell back after a brief early rebound and as G7 finance ministers prepare to hold emergency meeting tomorrow and discuss the widening financial contagion in the euro zone. Sources in the finance ministry in Canada and Italy confirmed the meeting.

The market pessimism gripped trading as investors sold stocks in resource, banking and technology sectors. The S&P 500 index, the widely followed benchmark declined more than 10% from its peak in April as commodities drop to the low for the year after economic data from the U.S., Europe and China confirmed the slowing economies.

European leaders voiced more proposals to offer depositors guarantee, regulate large banks at European levels and struggled to tackle the method of next bank bailouts.

Spain’s Prime Minister Mariano Rajoy said his nation prefers to receive bailout sent directly to bank than to governments that are asked to distribute to banks. Spain is likely to be the fourth nation following Greece, Portugal and Ireland to tap bailout funds from the European Stability Mechanism and may request as much as €80 billion.

Portugal also said it plans to inject as much as €6 billion in its three largest banks. European Central Bank, the European Union and the International Monetary Fund said their joint program of approving next tranche in the €78 billion bailout funds is on track and said “the authorities are implementing the reform policies broadly as planned and external adjustment is proceeding faster than expected.”

Portugal’s budget deficit is expected to fall to 4.5% this year from 5.6% in 2011 and decline further to 3% next year according to officials at the IMF.

However, Portuguese finance minister Vitor Gaspar estimated GDP growth in the current year to ease to 0.2% instead of 0.6% estimated earlier and the unemployment is expected to jump to 16% next year and public debt is estimated to rise to 118% of GDP this year.

In the U.S. merger news, Salesforce.com agreed to buy Buddy Media for approximately $689 million Vanguard agreed to acquire natural gas assets for $445 million from Antero Resources.

On the earnings front, AutoNation May sales surged 45% and the retailer Conn's lifted its annual outlook. Salesforce.com agreed to acquire Buddy Media for $689 million and Vanguard Natural agreed to acquire energy assets for $445 million. WellPoint offered $900 million in cash for 1-800 Contacts.

European markets were in a holding pattern as political leaders voice proposals ahead of the regional summit later in the year. Euro are wholesale inflation was steady and consumer price inflation declined but stayed above the target range established by the central bank.

Stocks in Japan extended losses and the benchmark indexes dropped to six month low and the Topix fell to 28-year low. Sony Corp declined to 32-year low and export sensitive stocks to Europe led the decliners.

Australian stocks plunged and the benchmark index declined to six-month low after commodities prices eased. Business inventories adjusted for inflation and seasonality declined in the March quarter and corporate profit fell.

Commodities, Bonds and Currencies

The yields on 10-year U.S. bond decreased to multi-decade low of 1.52% and 30-year U.S. bond edged lower to 2.56%.

The U.S. dollar edged up 0.4% to $1.249 to one euro and gained against the Japanese yen to 78.34 in New York trading. Real in Brazil traded near three-year low at 4.47 to a dollar after the central bank cut the rate to record low of 8.5% and Argentine peso traded at a new low against dollar at 4.47.

Immediate delivery futures of Texas crude oil decreased 1 cent to $83.22 a barrel and Brent crude futures fell 43 cents to $98.03. Futures of natural gas increased 0.06 cents to $2.38 per mbtu and gasoline price increased 0.3 cents to 266 cents a gallon.

In metals trading, copper decreased 0.5 cents to $3.30 per pound, gold decreased $7.60 to $1,616 per ounce and silver fell 49 cents to $28.02.