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While you were sleeping: Greek troubles weigh

Thursday 17th May 2012

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Shares on Wall Street were mixed as the European sovereign debt crisis weighed on more optimistic indicators about the outlook closer to home. In Greece, an interim government will help prepare for new elections next month, probably on June 17.

No official announcement on the date has been made. In the meantime, trouble seems to be mounting. The European Central Bank said today it has stopped providing liquidity to some Greek banks as they have not been successfully recapitalised, confirming an earlier report by Reuters.

Meanwhile, Greeks are concerned a potential exit from the euro will slash the value of their savings. Shares of National Bank of Greece sank 13 percent. The nation’s central bank chief said as much as 700 million euros had been withdrawn from Greek banks since the May 6 election. Europe's Stoxx 600 Index dropped 0.6 percent on the day.

The euro traded as low as US$1.2681 earlier in the session, and was last 0.1 percent weaker on the day, after earlier rising as much as 0.2 percent. The ongoing uncertainty about the developments in Europe, and the impact they might have there, as well as abroad, limited appetite for stocks on Wall Street.

“The situation in Europe is extremely precarious,” Barry Knapp, the New York-based head of US equity strategy at Barclays, told Bloomberg. “More needs to be done. You can’t have a lot of confidence that assets will stabilise.”

In late afternoon trading in New York, the Dow Jones Industrial Average eked out a 0.04 percent gain. The Standard & Poor's 500 Index fell 0.21 percent and the Nasdaq Composite Index declined 0.53 percent. Trading was choppy.

US Federal Reserve policy makers suggested additional stimulus might be needed to help propel the world's largest economy if growth slowed or if there was an elevated risk it would, minutes of the Federal Open Market Committee’s April 24-25 meeting released today showed.

"Several members indicated that additional monetary policy accommodation could be necessary if the economic recovery lost momentum or the downside risks to the forecast became great enough,” according to the minutes. For now, the most recent data exceeded expectations.

Housing starts rose 2.6 percent to a 717,000 annual rate in April, up from last month's revised 699,000 pace, according to the Commerce Department. Industrial production increased 1.1 percent in April, the most since December 2010, the Fed said.

The broader concern about where equities are headed doesn't seem to have affected the optimism surrounding Facebook, founded by Mark Zuckerberg. Today, the company said it will add about 84 million shares to its initial public offering, increasing the float to about 421 million shares. Pricing is expected to be finalised tomorrow.

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