While you were sleeping: Cool breeze chills investors

Tuesday 16th March 2010

From concerns about China to worries about sovereign debt ratings to the outlook for US bank profits, investors had plenty of reasons to rethink the outlook.

In early afternoon trading, the Dow Jones Industrial Average fell 0.25%, the Standard & Poor’s 500 fell 0.49% and the Nasdaq Composite fell 0.73%.

The Chicago Board Options Exchange Volatility Index, or VIX, which is known as Wall Street’s ‘fear gauge’ rose 4.89% to 18.44.

Among the decliners were bank stocks after Senate Banking Committee Committee Christopher Dodd proposed giving the Federal Reserve the power to break up financial firms that were deemed too big a risk for the system.

As a group, S&P financial stocks shed 1%, including losses for Goldman Sachs Group and Morgan Stanley.

Other stocks which contributed to the market’s slide included Exxon Mobil Corp, Chevron Corp, Boston Scientific Corp and Google Inc.

In Europe overnight, the Dow Jones Stoxx 600 slid 0.7% to 256.65.

Among national benchmarks, the UK ’s FTSE 100 fell 0.57%, Germany ’s DAX 30 fell 0.7% and France ’s CAC 40 declined 0.93%

Some of the biggest movers included BHP Billiton, Wolseley Plc and Scor SE.

While some market pundits have been calling for investors to rein in expectations for this year, Bloomberg News reported on two bullish forecasts.

The Stoxx 600 may rise 30% this year, according to Ian Harnett, the Absolute Strategy Research analyst who told investors to purchase equities just as the benchmark gauge began a yearlong, 64% surge.

Bloomberg also reported that JPMorgan Chase & Co.’s head of European equity strategy Mislav Matejka says British hoteliers and German shoemakers will rally as European profits climb twice as fast as the Standard & Poor’s 500 Index.

The Dollar Index, which measures the greenback against a basket of six major currencies, rose 0.56% to 80.28.

Currency traders were mostly on the sidelines ahead of policy meetings this week at the Fed and the Bank of Japan.

In midday New York trading, the euro was down 0.8% on the day at US$1.3658, retreating from a four-week high just shy of US$1.3800 hit on Friday after euro zone industrial orders data beat forecasts.

Against the yen, the greenback was flat at 90.44 yen.

Overnight US federal funds rates rose to the highest since September and the cost to dealers to borrow and lend US securities for one day more than doubled in the past month, Bloomberg said. Three-month Treasury bill rates rose last week to the highest since August.

The Reuters/Jefferies CRB Index, which tracks 19 raw materials, fell 1% to 270.57.

US crude for April delivery fell US$1.57 to US$79.67 per barrel by 12.46pm EDT (1646 GMT), after dropping as low as US$79.13, the lowest level since March 2. London Brent crude traded down US$1.50 at US$77.89 a barrel.

Businesswire.co.nz

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