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While you were sleeping: Heightened euro concerns

Wednesday 5th May 2010

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Equities plunged in both Europe and the US, along with commodities, as investors fretted about whether the debt crisis engulfing Greece would spread across the euro zone, challenging the outlook for the global economic recovery.

In late trading, the Dow Jones Industrial Average dropped 2.1%, the Standard & Poor's 500 Index fell 2.47% and the Nasdaq Composite tumbled 3.10%.

Technology stocks, top gainers for the year, were pressured the most, with the PHLX semiconductor index shedding 5.5%. Intel shed 3.4% and eBay Inc was 4.6% lower.

Among the active stocks were Alcoa Inc, Exxon Mobil Corp, Bank of America Corp, JPMorgan Chase & Co and Baxter International Inc. Shares in both Merck & Co and Pfizer Inc advanced as the two drug makers separately reported strong earnings.

The Chicago Board Options Exchange Volatility Index, or VIX, which is known as Wall Street's ‘fear gauge' surged 22.8% to 24.80.

Goldman Sachs Group Inc may enter talks to settle US Securities and Exchange Commission fraud charges as soon as today, according to a report on the Fox Business Network.

The Stoxx Europe 600 Index fell to a two-month low, shedding 2.9% to 252.97.
In the UK, the FTSE 100 shed 2.56%, Germany's DAX lost 0.2.6% and France's CAC 40 tumbled 3.64%.

The IBEX 35 index of Spanish shares was down more than 5%. Spain's prime minister dismissed as "complete madness" a market rumour his country would ask for a 280 billion euro loan from the euro zone.

"The domino effect, the contagion risk, is scaring the market," Kilian de Kertanguy, a fund manager at Cholet- Dupont Gestion SA in Paris, told Bloomberg News.

Among the most actives were Banco Santander SA, National Bank of Greece SA, BHP Billiton and BP Plc. Deutsche Lufthansa AG fell after reporting a wider than expected first-quarter loss.

The Dollar Index, which measures the greenback against a basket of six major currencies, rose 1.12% to 83.28.

In afternoon trading in New York, the euro was down 1.3% to US$1.3013, according to Reuters data, just above a one-year low touched earlier.

James Chen of FX Solutions in Saddle River, New Jersey, told Reuters that the euro could target further downside support around US$1.29, while on a longer-term basis, a major downside support was located around US$1.25.

Sterling fell 0.5% to US$1.5162 ahead of Britain's parliamentary election on Thursday, while the dollar was slightly lower at 94.40 yen after hitting 94.98 yen, its strongest since August 24. The euro fell 1.4% to 123.02 yen.

Greek 10-year yields rose 72 basis points to 9.20%. The rate on similar-maturity debt in Spain climbed 9 basis points to 4.11%, Portuguese yields advanced 32 basis points to 5.42% and the rate on Irish notes increased 16 basis points to 5.26%.

As for US Treasuries, the yield on the 30-year bond dropped eight basis points to 4.45%, the lowest level since December 18,  in New York, according to BGCantor Market data. The benchmark 10-year yield fell seven basis points to 3.62%.

The Reuters/Jefferies CRB Index, which tracks 19 raw materials, fell 2.33% to 271.62.

Spot gold fell to a session low of US$1,168.25 an ounce. It was bid at US$1,172.55 an ounce at 1521 GMT, against US$1,181.40 late in New York on Monday.

Silver prices were at US$17.99 an ounce against US$18.77. Platinum was at US$1,676.50 an ounce against US$1,720, while palladium was at US$514.50 against US$539.

US crude for June was down US$3, or 3.48%, at US$83.19 a barrel in early afternoon trading in New York. A US$3 slide on the day would be the largest one-day percentage loss since prices fell 4.99% on February 4, according to Reuters data.

Brent crude slid US$2.83 to US$86.11, but held on to its big premium over US crude futures, also known as WTI.

US copper futures fell to their lowest in more than two months. Copper for July delivery HGN0 dropped 10.00 cents, or 3%, to US$3.1935 per lb on the New York Mercantile Exchange's COMEX division.

Zinc and lead hit multi-month lows, falling more than 6%, against the backdrop of the decline in copper and rising London Metal Exchange inventories. Nickel also sank more than 6% as stocks increased.

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