U.S. Inflation, Euro Weakness; Stocks Waver

Mukesh Buch
15 Dec, 2009
New York City

U.S. stocks and bonds edged lower and the dollar gained on the worries that the inflation is on the rise. The measure of wholesale inflation PPI increased 1.8% and capacity utilization increased but remained well below the norm.

[R]4:30 PM New York, 9:30 PM London, 8:30 AM Sydney –U.S. stocks and bonds edged lower and the dollar gained on the worries that the inflation is on the rise. The measure of wholesale inflation PPI increased 1.8% and capacity utilization increased but remained well below the norm.[/R]

Stocks traded sideways but closed lower with the Treasuries after the release of industrial production and PPI inflation data. The Producer Price Index increased 1.8% in November and total output in the month increased 0.8%. The dollar gained against the euro on the worries that the inflation forces are gathering.

The fears of euro zone worries also weighed on the euro. Greece, Ireland, Portugal and Spain are already struggling to contain ballooning budget deficit. Austria was forced nationalize Hypo Group Alpe-Adria. Smaller countries in the Eastern Europe block and in the Balkan region are also struggling with rising inflation and falling government revenues.

Best Buy dropped 7% after quarterly results. FactSet Research Systems dropped as much as 10% after it estimated earnings that missed analysts’ estimates. Starlim Technologies surged after Abbott Laboratories offered $123 million for the company.

UK inflation in November was 1.9%, just under the Bank of England target of 2%. Home prices in October decreased 2.2%. British Airways strike prompted a scramble to add new seats at Virgin and EasyJet. Whitbread makes £36 million offer for Coffeeheaven.

German investor confidence declined in December, its third monthly decrease in a row. Deutsche Bank estimated record profit in 2011. BNP Paribas completed the sales of $1 billion senior notes. Tui AG full year sales fell 14%.

The Cabinet Office in Japan approved the second budget of $80 billion and to provide access to additional financing to small businesses. The latest survey of businesses suggests more companies are lowering wages in Japan. Shipping lines and resource stocks led the decliners in Tokyo trading.

Property developers in China and Hong Kong declined after the regulators and government announce more measures to control the asset bubble in the sector. China plans to offer more low cost housing and control access to the lenders.

Stocks in India declined on the worries that the government is facing a challenge to control food price inflation. GMR is in talks with Singapore based Temasek to raise $150 million for its power project. India hopes to collect $5 billion from its stake sale in NTPC.

North American Markets

Dow Jones Industrial Average decreased 49.05 or 0.5% to a close of 10,452.00, S&P 500 Index edged lower 6.2 or 0.6% to 1,107.93, and Nasdaq Composite Index decreased 11.05 or 0.5% to close at 2,202.05. Toronto TSX Composite Index declined 4.67 or 0.04% to 11,541.02.

Latin American Markets Indexes

Mexico Bolsa Index decreased 107.28 or 0.4% to 31,902.60 and Brazil Bovespa Stock Index fell 38.59 or 0.06% to 69,310.81.

Europe Markets Review

In London FTSE 100 Index closed lower 29.57 or 0.56% to 5,285.77, in Paris CAC 40 Index increased 3.65 or 0.10% to close at 3,834.09, in Frankfurt DAX index higher 9.08 or 0.16% to close at 5,811.34. In Zurich trading SMI increased 6.31 or 0.10% to close at 6,439.40.

Asian Markets Review

The Nikkei 225 Index in Tokyo closed lower 22.20 or 0.22% to 10,083.48, and Hang Seng index in Hong Kong decreased 271.83 or 1.23% to 21,813.92, and CSI 300 index in China lower 29.41 or 0.81% to 3,583.34. ASX 200 index in Australia increased 19.50 or 0.42% to 4,673.50. The FTSE Bursa KL Composite index in Malaysia was higher 5.36 or 0.42% to 1,270.81.

The Kospi Index in South Korea increased 1.08 or 0.06% to close at 1,665.85. SET index in Thailand closed lower 0.10 or 0.01% to 709.64. JSE Index in Indonesia decreased 11.65 or 0.46% to 2,494.74. The Sensex index in India decreased 220.39 or 1.29% to 16,877.16.

Commodities, Metals, and Currencies

Crude oil increased $0.13 to $70.8 a barrel for a front month contract, natural gas edged up 1 cent to $5.54 per mBtu and gasoline increased 1.84 cents to 184.51 cents.

Soybean future closed up 0.25 cents to $10.62 a bushel. Wheat futures closed down 6.75 cents in Chicago trading to $5.36 a bushel. Sugar closed lower 0.46 cent 24.82 cents.

Gold increased $3.60 in New York trading to close at $1,126.00 per ounce, silver closed up $0.01 to $17.45 per ounce and copper for the front month delivery decreased 0.10 cent to $3.14 per pound.

Dollar closed higher against euro to $1.435 and edged higher against the Japanese yen to 88.66.

Yield on 10-year U.S. bonds increased to 3.59% and with 30-year maturities closed up at 4.52%.