S&P Fluctuates Near Record, European Bond Yields Drop to New Lows

Nichole Harper
27 Aug, 2014
New York City

U.S. market indexes struggled and the S&P 500 index traded above 2,000 for the second day in a row. Congressional Budget Office raised its estimate of federal budget deficit to $506 billion, largely on lower than expected corporate tax revenues.

[R]12:10 PM New York – U.S. market indexes struggled and the S&P 500 index traded above 2,000 for the second day in a row. Congressional Budget Office raised its estimate of federal budget deficit to $506 billion, largely on lower than expected corporate tax revenues.[/R]

Stocks on Wall Street struggled and market indexes traded mixed after the widely followed S&P 500 index closed above 2,000 for the first time.

U.S. indexes have advanced in 10 of last 13 days and investors are looking for earnings growth to propel markets higher in the next quarter.

S&P 500 index eased 1.3 to 2,001.2 and the Nasdaq Composite Index gained 1.4 to 4,572.05.

The latest acquisition of Canada based Tim Hortons by Burger King Worldwide raised a flurry of questions from U.S. politicians as more companies seek foreign acquisitions and shift headquarters to lower tax country.

Fiscal 2014 Federal Deficit Estimate Revised Higher

The Congressional Budget Office on Wednesday said federal budget deficit will smaller than previous estimate over the next decade, as the low interest rates trim government’s cost of borrowing.

The agency also revised higher its estimate of fiscal 2014 deficit by $14 billion to $506 billion, 2.9% of gross domestic product. The previous estimate was released in April.

The new revision of higher deficit is largely the result of lower than expected corporate tax revenues of $315 billion from the previous estimate of $351 billion.

Government spending, however, is expected to decline only 0.3% from the April forecast and the CBO also lowered its GDP growth estimate to 1.5% from 3.1% on “economic weakness in the first half of the year.”

Fiscal 2013 federal government deficit of $680 billion was the first budget gap below $1 trillion of Barack Obama’s presidency. The deficit has been declining since 2009 after reaching a record high of $1.4 trillion in 2009.

The shortfall of $506 billion in fiscal 2014 would be the smallest since 2008 when the budget gap was $458 billion.

However, the agency cautioned that the deficit pressures are rising an in the next decade the budget gap is likely to rise against to $1 trillion in 2024 if current federal laws for spending and taxes remain unchanged.

European Markets

Bond yields across Europe declined and fell near the low of the year as investors expect another round of stimulus from European Central Bank.

German bond yield declined to a record low of 0.91% and yield of Spanish bonds fell 3 basis points to 2.14%. French 10-year bond yields decreased to 1.245% and Italian bod yields dropped to a new low of 2.39%.

Yields on Dutch and Irish government debt also fell to record lows.

In London trading, FTSE 100 index edged down 0.04% or 2.51 to 6,820.25 and in Frankfurt the DAX index fell 0.2% or 19.09 to 9,569.06.

In Paris, CAC 40 index slid 0.04% or 1.97 to 4,391.44.

Brazil based Oi has hired bankers to explore the stake acquisition in rival Tim Participacoes from Telecom Italia that may cost as much as $8 billion.

Foxtons Group net surged 64%. Marine Harvest net swung to a loss of 142 million kronor but revenue climbed 48%. Seadrill net tumbled 65%

Asian Markets]

Market indexes in Tokyo extended gains in the week and the yen continued to slide for the third day after advancing in two previous weeks.

The Nikkei 225 Stock Average gained 13.60 to 15,534.82 and the broader Topix index rose 0.91 to 1,285.92.

The yen closed at 103.93 against one U.S. dollar.

Investors also took positive view of the U.S. consumer confidence index increase to the most since 2007 and a surge in durable goods orders as many large Japanese electronics and automakers rely on exports to the U.S.

The Sensex Index increased 117.34 or 0.4% to close at 26,560.15 The CNX Nifty jumped 31.30 to 7,936.05.