Wall Street Extends World Markets Decline, Oil and Gold Fall 3%

Bikram Pandey
21 Jun, 2012
New York City

U.S. indexes extended worldwide sell off after a string of weak economic data from the U.S., euro zone and China. Crude oil, copper and gold dropped more than 3%. Stress test in Spain showed banks may need as much as $78 billion.

[R]4:00 PM New York – U.S. indexes extended worldwide sell off after a string of weak economic data from the U.S., the euro zone and China. Crude oil, copper and gold dropped more than 3%. Stress test in Spain showed banks may need as much as $78 billion.[/R]

World markets were on the slide as the latest economic data suggest declining activities in the U.S., in the euro zone and in China.

Widely followed U.S. indexes declined more than 2% and oil, copper and gold dropped more than 3%. Banks were in focus on media reports that 17 largest U.S. banks are likely to face ratings cut by the Moody’s Investors Services.

The market declined was accelerated in the afternoon after the latest manufacturing data showed the slowest growth in mid Atlantic states according to a regional Fed survey. Also, home resale slowed in May and weekly survey of initial claims of unemployment showed a small increase last week.

Across Europe, business activities declined for the fifth month in a row in June and German manufacturing also contracted for the second month.

In Asia, a private survey of manufacturing showed eighth monthly decline in June and economy is expected to slow in the quarter to June, sixth decline in a row.

In merger news, Cabot agreed to acquire the Netherlands-based Norit for $1.1 billion. Agilent completed its acquisition of Denmark-based Dako.

In corporate news, Bed Bath first quarter net soared 24% and ConAgra fourth quarter net swung to $86.2 million loss. CarMax first quarter net falls 4.4% as wholesale unit sales fell. Red Hat first quarter net surged on subscription revenue growth.

European markets sharpened focus on Spain as the country battles worsening fiscal conditions. Spain raised €2.2 billion and France sold €8.43 billion of debt in an auction today at diverging borrowing costs. Manufacturing sector activity was mixed in the euro area.

The euro area current account surplus fell in April. German and euro area manufacturing activity contracted but French manufacturing sector rose in June. Swiss watch exports rose but money supply growth eased in May.

Separately, two consultants hired by Spain to conduct bank stress tests said banks may need between €51 billion and €62 billion if GDP shrinks 6.5% and home prices drop 60% from the peak. The conditions for the estimate did not include the decline in Spanish government bond prices. In the most likely or central scenario, banks are likely to need between €16 billion and €25 billion through 2014.

The UK indexes edged lower as world economic growth outlook dims. The UK retail sales improved and gross mortgage lending increased 24% in May. Invensys plunged 16% after takeover talks with Emerson Electric failed.

Trading sentiment in Tokyo recovered after the yen eased against the dollar. However, the latest manufacturing decline in China dampened the machinery stocks. Softbank gained on the hopes of more Apple products sales. Foreign investors stepped up buying of Japanese stocks last week.

Australian stocks declined after a private manufacturing survey in China indicated contraction for the eighth month to June. Retailer Billabong launched $225 million offering at 44% discount. Myer reiterated 15% decline in annual earnings.

Commodities, Bonds and Currencies

The 10-year bond yield decreased to 1.60% and 30-year bond fell to 2.68%.

The U.S. dollar inched up to $1.256 to a euro and rose against the Japanese yen to 80.16 yen.

Immediate delivery futures of Texas crude oil decreased $2.99 to $78.45 a barrel and Brent crude fell by $3.26 to $89.44, futures of natural gas rose 0.03 cents to $2.55 per mbtu and gasoline price decreased 3.7 cents to 255.32 cents a gallon.

In metals trading, copper fell 9 cents to $3.30 per pound, gold fell $47.30 to $1,568.50 per ounce and silver decreased $1.51 to $26.87.