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While you were sleeping: Warnings and warning signs

Friday 26th February 2010

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Shares dropped across Europe after Moody’s said it might cut Greece’s debt rating and they dropped in the US after the latest economic report showed that the manufacturing sector remain depressed.

In early afternoon trading on Wall Street, the Dow Jones Industrial Average was 1.46% lower, the Standard & Poor’s 500 Index slid 1.31% and the Nasdaq Composite shed 1.36%.

The slide was paced by General Electric Co, Caterpillar Inc, Alcoa Inc. and Exxon Mobil Corp.

US stocks also were knocked by two reports on the economy. The latest report on durable goods showed that demand slid 0.6% in January from a 2% rise in December - and that demand would have been much lower if not for a number of high value aircraft orders.

In a separate report, the number of Americans seeking jobless benefits rose unexpectedly for a second straight week, signalling that the recovery would remain a bumpy one.

The Chicago Board Options Exchange Volatility Index, or VIX, which is known as Wall Street’s ‘fear gauge’ surged 6.8% to 21.64.

The Dow Jones Stoxx 600 fell 1.6% to 243.29. Across Europe, the UK’s FTSE 100 ended  down 1.2%, Germany’s DAX lost 1.48% and France’s CAC 40 dropped 2.02%.

Among the decliners were BHP Billiton, Hays Plc and Piraeus Bank SA. British American Tobacco Plc and Tenaris SA also fell.

Moody’s added its concerns about the Greek debt outlook a day after Standard & Poor’s said it might cut its rating on Greece again by the end of March.

Pierre Cailleteau, the head of Moody's global sovereign ratings, told Reuters in an interview that Moody's would follow the situation in Greece and see what was happening on the ground.
"We have to look at the facts and whether the government of Greece is going to do what it has promised to do," he said.

Moody's currently has Greece's long-term debt rating at A2 with a negative outlook. Standard and Poor's said on Wednesday it might downgrade Greece's BBB+ rating by one or two notches within a month.

The ratings developments were not good news for the euro, which fell to a one-year low against the yen.

The yen appreciated 1.6% to 120.04 per euro at midday in New York from 122.03 yen.  The US dollar declined 1.4% to 88.89 yen, falling below the 89 yen level for the first time since February 5.

The euro declined to US$1.3502 from US$1.3538. The European currency has fallen 2.7% versus the dollar in February, heading for a third monthly loss, its longest stretch since November 2008, according to Bloomberg data.

The Dollar Index, which measures the greenback against a basket of six major currencies, rose 0.14% to 80.89.

U.S. Treasuries rose on the flight to safer investments. The benchmark 10-year US Treasury note was up 12/32, with the yield at 3.6456%. The 30-year US Treasury bond was up 22/32, with the yield at 4.5921%, Reuters reported.

The cost of insuring against default on Greek government debt rose for a fourth day on concern ratings downgrades will cut the nation’s access to European Central Bank funding, Bloomberg said.

Credit-default swaps on Greece jumped 10 basis points to 394, the highest in more than two weeks, according to CMA DataVision prices at 2.45pm in London. Contracts on Portugal rose 0.5 basis points to 181.5, Spain increased 4 to 140 and Italy climbed 4.5 to 136, CMA prices show.
Concerns about global growth hit commodities.

US crude futures for April fell US$2.73 to US$77.27 a barrel. London Brent crude traded down US$2.56 to US$75.53 a barrel.

Spot gold was bid at US$1,094.70 an ounce at 1635 GMT, against US$1,097.25 late in New York on Wednesday. US gold futures for April delivery on the COMEX division of the New York Mercantile Exchange fell US$1.60 to US$1,095.60 an ounce.

Benchmark copper for three-months delivery on the London Metal Exchange traded at US$7,080 a tonne in official rings from a close of US$7,155 on Wednesday.

"In 2010 it's unrealistic to expect China to support copper prices. Demand from Europe and the U.S. has to improve. Copper consumption in China is likely to grow at a slower pace from last year," said Liu of China International Futures.

On Wednesday, data showed refined copper imports from top consumer China fell to 196,926 tonnes in January, from 244,013 tonnes in December. Record imports from China last year helped copper surge 140%.

The Reuters/Jefferies CRB Index, which tracks 19 raw materials, fell 1.61% to 270.31.

 

 

 

 

Businesswire.co.nz



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