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While you were sleeping: Greek drama returns

Thursday 22nd April 2010

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Worries about Greece’s ability to avert a financial failure knocked shares lower in both Europe and on Wall Street, refocusing investors on the risks with sovereign debt and offsetting positive earnings news from the US.

In late trading, the Dow Jones Industrial Average was down 0.14%, the Standard & Poor’s 500 Index fell 0.38% and the Nasdaq Composite slipped 0.05%.

Among the active stocks were Abbott Laboratories, Gilead Sciences Inc, Merck & Co as well as AMR Corp an AT&T.

On a bright note, strong earnings from Apple Inc and Boeing Co bolstered shares in those two companies. Shares in Apple were up 5.8%, while Boeing’s stock was up 4.2%. Shares in Morgan Stanley rose 4.3% after it too reported solid quarterly results.

On the Goldman Sachs Group front, Bloomberg News reported that the banker at the centre of the fraud charge against the firm, Fabrice Tourre agreed to testify and might defend his actions at the US Senate hearing next week.

The Chicago Board Options Exchange Volatility Index, or VIX, which is known as Wall Street’s ‘fear gauge’ rose 5.28% to 16.56.

The Stoxx Europe 600 Index fell 0.6% to 268.23 with the declines paced by shares in Greece, Spain and Portugal.

Talks began overnight on a funding package for the Greek government, renewing concerns about the outlook for sovereign debt.

In the UK, the FTSE 100 shed 1.04%, Germany’s DAX lost 0.54% and France’s CAC 40 tumbled 1.22%.

Among the most actives were Alpha Bank SA, Banco Santander SA and Banco Espirito Santo SA as well as Vedanta Resources Plc and Oriflame Cosmetics SA.

European tech shares rallied after Apple’s stunning quarterly results yesterday. Infineon Technologies AG and ARM Holdings Plc advance.

“Investors have to be selective,” Andrea Williams, a portfolio manager at Royal London Asset Management, told Bloomberg News, because of the continuing deficit concerns and issues with financial companies.

The Dollar Index, which measures the greenback against a basket of six major currencies, rose 0.13% to 81.18.

In early afternoon New York trading, the euro dropped 0.3% to US$1.3397, after having fallen as low as US$1.3359, according to Reuters data, its lowest since April 9.

The euro's slide came as the premium investors demand to buy Greek government bonds rather than euro zone benchmark Bunds widened beyond 500 basis points, the highest in 12 years, according to Reuters, while the cost of insuring against a Greek default climbed to a record high.

Against the yen, the dollar was flat at 93.22.

The Swedish crown hit a 19-month high at 9.5850 per euro, extending its rally after Sweden's central bank on Tuesday cemented market expectations for a rise in interest rates in July or September. It’s the latest central bank to signal plans to raise rates in the next few months.

The Reuters/Jefferies CRB Index, which tracks 19 raw materials, rose 0.35% to 276.75.

Oil edged higher overnight as more planes returned to the skies in Europe. US crude futures traded up 26 cents to US$84.11 a barrel by 1803 GMT, after dropping to a session low of US$82.92 in the wake of a US inventory report.

US crude oil inventories rose 1.9 million barrels last week, against the forecast for a slight drop, the Energy Information Administration oil inventory data showed.

Platinum held near its two-year high, while gold trimmed its gains after the euro swooned in light of concerns about the bail-out talks in Greece. Spot gold was at US$1,145.15 an ounce, versus US$1,139.50 an ounce late in New York on Tuesday.

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