Wall Street Rally Fizzles, Chinese Exports Rise

Bikram Pandey
11 Jun, 2012
New York City

Wall Street turned negative after early euphoria fades and the euro zone worries over power market sentiment. Crude oil and metals tracked lower and U.S. Treasuries yields declined. Apple Inc released new versions of its popular computers and widely anticipated 3D mapping application.

[R]3:00 PM New York – U.S. indexes turned negative after early euphoria fades and the euro zone worries over power market sentiment. Crude oil and metals tracked lower and U.S. Treasuries yields declined. Apple Inc released new versions of its popular computers and widely anticipated 3D mapping application for its mobile phones.[/R]

U.S. and global indexes rallied after the euro zone finance ministers agreed to offer a preemptive Spanish bank bailout ahead of Greek election. The swift approval to head-off the widening crisis lifted market sentiment at least for today but also shifted venue to Italy and Greece.

The rally fizzled across both sides of the Atlantic on the lack of details of the agreement and the growing realization that Italy may be the next in line to seek even larger bailout and an uncertain outcome of Greek election on June 17.

Sovereign bond yields of peripheral euro zone nations barely budged indicating a lukewarm response to the Spanish agreement that lacked details.

European markets surged after ministers in the region agreed to support Spanish bank bailout. Market euphoria was tempered as investors searched for details and worried of the rising debt of Spanish government and bond yields barely budged.

Apple Inc released next version of MacBook line of computers with faster chips and sharper displays and promoted its new operating system for its mobile phones and tablets at a weeklong developer conference. Apple also released its new mapping application for iPhone users and revealed a new application Passbook designed to consolidate movie tickets, boarding passes and other items.

In European corporate news, Rheinmetall AG gained 26 cents to €33.78 and the conglomerate’s defense subsidiary was in focus after an Indian government agency suspended its subsidiary from participating in defense contracts and accused the company of peddling influence and attempting to bribe government officials.

TeliaSonera’s debt rating was reaffirmed by Fitch Ratings with a ‘stable’ outlook.

Volkswagen AG surged 4% to €126.65 after its luxury auto division Audi reported unit sales in May increased 13.7% to 128,900, record for the month. The company also lifted its annual unit sales outlook to 1.4 million from 1.3 million 2011 on stronger than expected sales in China and the U.S.

In Asia, markets gained higher on the optimism that the Spanish deal will for now forestall the widening contagion in Europe.

China reported a batch of economic data over the weekend that indicated a slowing economy. However, exports in May surged 15.3% from a year ago to $181.1 billion and imports rose 12.7% to $162.4 billion and trade surplus increased to $18.7 billion from $18.4 billion in April.

Stocks in Tokyo advanced after the euro zone ministers wasted no time in approving the request for Spanish bank bailout. Nikkei surged 1.9% and TDK, Canon and Mazda led the gainers in trading.

Commodities, Bonds and Currencies

The yields on 10-year U.S. bonds decreased to 1.59% and 30-year U.S. bonds edged lower to 2.70%.

The U.S. dollar edged up 0.2% to $1.2495 to one euro and gained against the Japanese yen to 79.41 in New York trading.

Immediate delivery futures of Texas crude oil decreased $1.23 to $82.87 a barrel and Brent crude futures fell $1.21 to $98.28. Futures of natural gas decreased 0.08 cents to $2.21 per mbtu and gasoline price decreased 1.6 cents to 266.91cents a gallon.

In metals trading, copper increased 4.4 cents to $3.32 per pound, gold increased $6.80 to $1,589 per ounce and silver added 8 cents to $28.55.