Sharechat Logo

While you were sleeping: Dithering is a sell signal

Tuesday 20th September 2011

Text too small?

Equities on both sides of the Atlantic slumped as the inability of European Union leaders to find a solution for the Greek fiscal crisis has investors throwing in the towel and running for cover.

International lenders will review whether Prime Minister George Papandreou can satisfy the conditions of the country’s rescue loans. The Greek leader cancelled a U.S. visit that was to begin on the weekend.

Today, EU and International Monetary Fund inspectors held a teleconference with Greek Finance Minister Evangelos Venizelos to assess whether the government is eligible for an aid payment of 8 billion euros due in October.

Investors have all but given up hope that Greece will avoid a default.

"My analogy on the euro zone is we're playing a massive game of Whac-A-Mole. No one has any idea of what the resolution is," Phil Orlando, chief equity market strategist at Federated Investors in New York, told Reuters.

"The bigger problem is it doesn't appear to me at least that the Greek people have the appetite to follow through on the austerity measures."

In late trading in New York, the Dow Jones Industrial Average dropped 1.32%, the Standard & Poor's 500 Index shed 1.34% and the Nasdaq Composite Index fell 0.81%.

In Europe, the benchmark Stoxx 600 Index ended the day with a 2.3% drop.

The euro was hit, too, as the currency last traded 1.2% weaker at US$1.3634. The euro was likely to test last week's seven-month low of US$1.3495 again soon, traders told Reuters.

Underpinning a fiscal crisis in the U.S. was President Barack Obama’s US$3 trillion plan to lower U.S. deficits by raising taxes on the rich.

The proposal failed, not surprisingly, to draw support from Republicans who labelled it a political stunt with little chance of becoming law. Obama made it clear though that he won’t sign any bill to cut the deficit unless it contains tax increases.

Meanwhile, Federal Reserve policy makers are gearing up to debate the world’s largest economy at a two-day meeting beginning Tuesday.

Amid the turmoil investors sought the relative safety of U.S. Treasuries. Yields on 10-year notes dropped 12 basis points to 1.93% at 1.58pm in New York, according to Bloomberg Bond Trader prices.

“Policy makers are unable or unwilling to do anything,” David Ader, head of U.S. government bond strategy at CRT Capital Group LLC in Stamford, Connecticut, referring to European officials, told Bloomberg News. “That is why people are buying two-year notes at 15 basis points even when they know the risk is we’re going to see the Fed in here selling them.”

Even gold, typically a safe-haven, fell, with gold futures for December delivery shedding 2.2% to US$1,774.70 an ounce on the Comex in New York.

Others remain optimistic about the precious metal. Gold may climb 21% to a record US$2,200 an ounce by the end of 2011, Tony Hall, the London-based chief investment officer of Duet Commodities Fund, told Bloomberg.

(BusinessDesk)

BusinessDesk.co.nz



  General Finance Advertising    

Comments from our readers

No comments yet

Add your comment:
Your name:
Your email:
Not displayed to the public
Comment:
Comments to Sharechat go through an approval process. Comments which are defamatory, abusive or in some way deemed inappropriate will not be approved. It is allowable to use some form of non-de-plume for your name, however we recommend real email addresses are used. Comments from free email addresses such as Gmail, Yahoo, Hotmail, etc may not be approved.

Related News:

New Zealand Rural Land Company Limited (NZX: NZL) Agreement to acquire large scale dairy asset portfolio
EROAD Limited (NZX: ERD) launches Clarity Solo Dashcam
22nd October 2021 Morning Report
Pictor ready to roll out game-changing COVID antibody test in New Zealand
Scott Technology Limited (NZX: SCT) Announces FY21 Results
21st October 2021 Morning Report
Greenfern Industries Limited (NZX: GFI) L&Q Notice
TruScreen Group Limited (NZX: TRU) Clinical Trial Results Highlight Efficacy of TRU Technology
20th October 2021 Morning Report
Freightways Limited (NZX: FRE) Acquisition of ProducePronto