Central Bank Support Withdrawal Worries U.S. and Global Markets

Nichole Harper
11 Jun, 2013
New York City

U.S. stocks extended losses in Europe and Japan on the rising market anxieties linked to central bank actions. On Wall Street stocks traded sideways on the speculation that Fed may withdraw stimulus earlier than expected. Bank and financial services led the decliners in New York.

[R]11:30 AM New York – U.S. stocks extended losses in Europe and Japan on the rising market anxieties linked to central bank actions. On Wall Street stocks traded sideways on the speculation that Fed may withdraw stimulus earlier than expected. Bank and financial services led the decliners in New York.[/R]

U.S. stocks traded lower after anxieties linked to central bank actions around the world overshadowed latest earnings reports.

Bank of Japan led firm on its policy actions after a 2-day meeting and did not extend bank loan maturities and investors also awaited the decision from the federal court about the latest European Central Bank plan to buy unlimited amounts of struggling government bonds.

Traders are also nervous about the possible early withdrawal of economic stimulus from the Fed.

U.S. market indexes have shot up more than 15% in the year so far and are ahead of gains in 2012 on the loose monetary policy from the Fed. By some measures, markets have become too reliant on Fed support and any talk of stimulus withdrawal has outsized impact on market performance.

After two hours of trading, the S&P 500 index declined 0.5% to 1,634.19 and the Nasdaq index fell 0.5% to 3,455.07.

European Markets

European markets traded lower as anxious market traders focused on the federal court decision in Germany on the latest central bank plan to purchase unlimited quantities of bonds of struggling nations.

The facility has been established by the European Central Bank but has never been used.

In London trading, FTSE 100 index declined 1.6% or 100.84 to 6,300 and in Frankfurt the DAX index dropped 1.7% or 138.96 to 8,169. In Paris, CAC 40 index plummeted 1.8% or 67.73 to 3,797.

The Greek benchmark index extended losses for the second day with a loss of 4.8% after falling 4.7% yesterday.

Greece failed to attract any buyer for the sale of its Depa SA gas monopoly, a setback for the nation that is struggling to raise 240 billion euros from the government asset sale.

Asian Markets

Market indexes in Tokyo closed lower after the Bank of Japan held firm on its stimulus plan and did not accommodate a growing chorus from bankers and economists to extend the maturity of recent bank loans.

Traders and economists had built up expectations of a new policy action from the Bank of Japan to extend the maturity of bank loans to two years from the current one year. However, the central bank offered no change in the current policy directive.

Stocks in Review

Catamaran Corp ((CTRX)) soared 11% after the fourth-largest drug benefits manager won a 10-year contract with Cigna Corp to manage prescription-drug demand.

Corinthian Colleges Inc ((COCO)) dropped 2% after the U.S. Securities and Exchange Commission initiated an investigation into company’s student recruitment policies.

Lululemon Athletica Inc ((LULU)) plunged 15% after the company announced the resignation of its Chief Executive Officer Christine Day and the expensive yoga wear retailer reported quarterly net income increased 1.4% to 32 cents a share or $47.3 million.

Sprint Nextel ((S)) gained 2% after Japan based Softbank lifted its offer for the company by 7.5% to $21.6 billion.