World Markets Slide as Fiscal Cliff Looms

Bikram Pandey
28 Dec, 2012
New York City

U.S. indexes extended losses for the fifth day in a row as fiscal cliff is away three days. Market indexes dropped 1% as lawmakers gather for one last time to narrow budget differences. Crude oil price gained and base metal prices inched higher.

[R]4:30 PM, New York – U.S. indexes extended losses for the fifth day in a row as fiscal cliff is away three days. Market indexes dropped 1% as lawmakers gather for one last time to narrow budget differences. Crude oil price gained and base metal prices inched higher.[/R]

U.S. stocks dropped across the broad after Washington gridlock showed no sign of easing. President Barack Obama and Congressional leaders are gathering in the White House to try one last time before the year-deadline.

Republicans are gathering in Washington ahead of unusual session of Congress to avert the fiscal cliff deadline that is going to affect most Americans.

The lack of budget agreement could cut off extended jobless benefits for more than 2 million people and delay filing of tax returns for several millions more and businesses may not be able to issue pay checks for the lack of clarity on payroll tax rates.

In corporate news, Acorda completed the acquisition of Neuronex Inc. Parexel Intl. agreed to acquire Liquent, Inc. and lifted 2013 outlook. Porsche SE climbed after it won a hedge fund lawsuit. Berkshire Partners invests $2 billion and merge two telecom network providers.

Royal Caribbean Cruise Ltd awarded a contract to build 361 meter “Oasis” class cruise ship to a shipyard controlled by STX France SA for more than €1 billion. The contract terms also includes an option for a second ship.

European markets traded lower on the worries that the U.S. lawmakers are likely to miss a deadline to settle budget differences. Market indexes in Paris fell 1.4% and in Frankfurt declined 0.6%. Trading volume in the region fell sharply in the session. Italy sold €3 billion of bonds.

In corporate news in the region, Atari, the struggling game maker declined after it estimated fiscal year loss. Bankia, troubled Spanish bank, plunged 22% after it was removed the Spanish benchmark IBEX 35. Belgium based KBC Groep NV agreed to sell its stake in a bank in Slovenia. Vinci SA acquired Portugal controlled ANA.

UK store visits on Boxing Day barely increased 0.6%. French economic growth in the third quarter was lowered to 0.1% from the previous estimate of 0.2%. Unemployed persons in France increased in November. Italy completed €3 billion sale of bonds after placing more than €10 billion of bonds a day ago.

The Nikkei index surged 23% in 2012 and its first gain in three years and best annual gain since 2005. The yen declined 12% against the dollar on the hopes that the recently elected government will conduct aggressive stimulus policies and demand Bank of Japan to set 2% inflation target.

Australian stocks extended gain for the third day in a row after resource stocks rallied for the second day. Iron ore prices traded at a 8-month high as demand from China rebounds. Australian dollar drops to a 2-month low.

Commodities, Bonds and Currencies

U.S. treasury yield on 10-year bond closed at 1.71% and on 30-year bond rose to 2.88%.

The U.S. dollar inched lower to $1.3224 to a euro and increased against the Japanese yen to 86.11 yen.

Immediate delivery futures of Texas crude oil increased 18 cents to $91.05 a barrel and Brent crude fell 5 cents to $110.74, futures of natural gas increased 6 cents to $3.45 per mbtu and gasoline traded down 1.26 to 280.87 cents a gallon.

In metals trading, gold increased $7.90 to $1,655.90 per ounce and silver fell 15 cents to $30.10 and copper closed up 0.70 cents to $3.59 a pound.