Debt Downgrade Worries Roil Markets

123jump.com Staff
21 May, 2009
New York City

U.S. stocks closed lower on the growing worries of the U.S. government debt after a rating agency joined chorus of others in expressing negative views on the UK debt. Gold closed above $950. The dollar declined to its lowest level in the year and U.S. bond yields increased.

[R]5:00 PM New York, 10:00 PM London, 8:00AM Sydney – Stocks in New York closed lower on the growing worries of the U.S. government debt after a rating agency joined chorus of others in expressing negative views on the UK debt rate. Precious metal surged and gold closed above $950. The dollar declined to its lowest level in the year and 10-year Treasury yield jumped.[/R]

U.S. stocks declined in the morning on cautious views on the economy and elevated jobless claims. UK debt worries dragged European markets lower. The UK debt watch sent alarms that the U.S. sovereign debt may face downgrade unless the government restrict its debt. UK is likely to join Spain, Greece and Italy which suffered debt downgrade in the recent months and the U.S. may suffer the decline in debt rating.

Regional banks declined after Regions Financial raised $1.6 billion in stock offering at a discounted price.

European markets fell after UK was warned to get its public finances in order. S&P warned that UK may lose its top rating. Nations relying on exports to the U.S. are reporting large economic declines in the first quarter. Singapore, Japan, Germany and Mexico economies shrank 14.5% or more.

UK stock investors stayed on the sideline after S&P sounded rating alarm but the government completed its debt offering. UK retail sales edged up in April. British Land dropped 8% after it reported larger than expected loss. Cable & Wireless declined 10% on income fall and insider stock sale.

Investors in Japan focused on a sudden and unexpected rise in swine flu cases. Yen continues to rise against dollar. Exporters declined on yen and retailers fell on flu worries.

In India, the latest measure of wholesale inflation showed indicated few pressures on prices. Regional parties are still quarreling in UPA coalition and holding out for wider control in the government. Trading in stock market though declined but stays above average.

The Australian dollar added to its recent advances against other currencies as metals and energy prices firm. Hastie Group dropped 17% after it completed its offering to raise A$60 million. Seek Limited increased after it completed the acquisition of China based online employment company.

North American Markets

Dow Jones Industrial Average decreased 129.91 or 1.5% to a close of 8,292.13, S&P 500 Index declined 15.14 or 1.7% to 888.33, and Nasdaq Composite Index edged lower 32.59 or 1.9% to close at 1,695.25. Toronto TSX Composite Index closed down 282.85 or 2.8% to 9,949.59.

Of the stocks in S&P 500 index, 71 increased, 427 declined and 2 were unchanged.

Regions Financial led decliners in the S&P 500 index with a loss of 16.2% followed by losses in GameStop of 15.5%, in Huntington Bancorp of 10.8%, in Patterson Corp of 10.6% and in Fifth Third Bancorp of 6.3%.

General Motors led gainers in the S&P 500 index with a surge of 32.4% followed by gains in SLM Corp of 10%, in Intuit Inc of 8.1%, in Computer Science Corp of 7.5%, in QLogic Corp of 6.7% and in Citrix Systems of 6.1%.

South American Markets Indexes

Mexico Bolsa Index decreased 578.34 or 2.4% to 23,821.26. Brazil Bovespa Stock Index declined 1,157.76 or 2.3% to 50,087.33.

Argentina Merval Index added 0.7% and Peru Lima General Index decreased 1.1%. Colombia IGBC General Index edged lower 1.5% and Venezuela Stock Market Index edged down 0.2%.

Europe Markets Review

In London FTSE 100 Index closed lower 122.94 or 2.75% to 4,345.47, in Paris CAC 40 Index decreased 85.96 or 2.60% to close at 3,217.41 and in Frankfurt DAX index lower 138.27 or 2.74% to close at 4,900.67. Markets of Switzerland are closed today.

Asian Markets Review

The Nikkei 225 Index in Tokyo closed lower 80.49 or 0.86% to 9,264.15, Hang Seng index in Hong Kong decreased 276.35 or 1.58% closed to 17,199.49, CSI 300 index in China lower 62.86 or 2.23% closed to 2,750.01. ASX 200 index in Australia decreased 10.70 or 0.28% closed to 3,813.90. The KL Composite index in Malaysia lower 7.07 or 0.68% closed to 1,035.56.

The Kospi Index in South Korea decreased 14.05 or 0.98% to close at 1,421.65. SET index in Thailand closed lower 12.64 or 2.25% to 548.77.The Sensex index in India decreased 324.12 or 2.31% closed to 13,736.54. The Markets of Indonesia were closed today.

Commodities, Metals, and Currencies

Crude oil decreased $0.97 to close at $61.07 a barrel for a front month contract, natural gas decreased 37 cent to $3.60 per mBtu and gasoline futures decreased 0.45 cents to close at 180.50 cents per gallon.

Wheat futures closed down 4.25 cents in Chicago trading and closed at $5.93 a bushel. Sugar increased 0.24 cent in trading at 15.62 cents a pound. Soybean future closed up 6.00 cent to $11.75 a bushel.

Copper for the front month delivery increased 4.10 cents to $2.06 per pound. Gold increased $13.80 to $951.20 and silver increased 16.5 cents to $14.45.

Dollar edged lower against euro to $1.3894 and closed down against the Japanese yen to 94.42.

Yields on 10-year U.S. bonds increased to 3.36% and with 30-year maturities closed up at 4.31%.