While you were sleeping: Back to 1987

Friday 7th May 2010

Stocks in Europe and the US extended losses amid disappointment about the European Central Bank’s lack of new measures to help stem the Greek debt crisis.

The Dow Jones Industrial Average posted its biggest intraday loss since the market crash of 1987, according to Bloomberg data. At one point the index had shed 998 points. Reuters reported that the plunge was linked to a trading error at a major firm, but no other details were immediately available.

At its meeting overnight, the European Central Bank kept benchmark interest rates at a record low of 1% for the 12th month in a row and ignored calls for extra cash injections or a purchase of Greek and possibly other countries' government bonds to end the debt crisis that was hurting confidence in the euro.

President Jean-Claude Trichet said the bank's policymakers did not even discuss the prospect of buying government bonds at their Lisbon meeting.

"Trichet is going for the 'crisis, what crisis?' approach," Gary Jenkins from Evolution Securities told Reuters.

Trichet said the ECB remained alert and was able to take appropriate decisions, even if they were unconventional, without wavering from its price stability goal.

"We will never, never put in jeopardy the anchoring of inflation expectations and the delivery of price stability which is our major asset," Trichet said.

In late trading, the Dow Jones Industrial Average was down 3.41%, the Standard & Poor’s 500 Index was down 3.49% and the Nasdaq Composite was down 3.45%.

Compounding the drop in US stocks were concerns about the health of consumer spending after most top US retail chains including Costco Wholesale Corp and Gap Inc reported weaker-than-expected same-store sales for April.

Among other active stocks were major US cable companies including Comcast Corp, Time Warner Cable Inc and Cablevision Systems Corp, which plunged because of concerns that the US government planned to assert more control over broadband policy.

The Chicago Board Options Exchange Volatility Index, or VIX, which is known as Wall Street’s ‘fear gauge’ rocketed up as much as 60 per cent at one point, according to Reuters.

European shares ended at a 10-week closing low, falling for the third-straight session, on increasing concern about the Greek debt crisis and its impact on the other euro-zone countries. But European shares averted the crash that hit Wall Street.

The Stoxx Europe 600 Index slid 1.46%. In the UK, the FTSE 100 fell 1.52%, Germany’s DAX slid 0.84% and France’s CAC 40 lost 2.2%.

Among the most actives were Banco Santander, Barclays, Societe Generale and Alcatel-Lucent.

The Dollar Index, which measures the greenback against a basket of six major currencies, rose 0.51% to 84.51.

The euro tumbled to a 14-month low of 1.2652 against the US dollar.

Against the yen, the euro was down 0.9% at 119.20 yen. The US dollar was down 0.4% at 93.54 yen.

European policymakers have warned the euro's survival depends on a life-support package for Greece agreed last weekend.

Ten-year euro-zone government debt yields declined 0.07 percentage point to 2.80% and benchmark U.S. Treasury note yields fell to 3.49% from 3.55%.

Sterling fell as low as US$1.4994 before quickly bouncing back to US$1.5003, down 0.6% on the day. Britons voted overnight in national elections with the outcome deemed too close to call at this point.

The Reuters/Jefferies CRB Index, which tracks 19 raw materials, fell 2.0%. It has dropped almost 6% this week.

Gold priced in euros, in Swiss francs and in sterling all hit record highs, underlying the metal's strength with rising currency volatility, according to Reuters data, as investors fled the euro-zone sovereign debt markets and currencies.

Spot gold rose to US$1,196.55 an ounce, its firmest since December 4 and its fourth rise in the last five trading sessions. It was at US$1,192.45 an ounce at 12:30pm EDT, versus $1,174.20 late in New York on Wednesday. Gold hit a record high of US$1,226.10 in December 2009.

U.S. gold futures for June delivery on the COMEX division of the New York Mercantile Exchange, advanced 1.6% to US$1,193.90 an ounce.

Platinum was at US$1,658.50 an ounce, after earlier rising as high as US $1,682 an ounce against US$1,625 on Wednesday. Palladium was at US$509 against US$501.50 and silver was at US$17.48 an ounce versus US$17.43.

Oil dropped. U.S. crude for June delivery was down 1% at US$79.17 a barrel by 12:05pm EDT, after earlier falling as low as US$78.24.

London Brent crude fell 1.4% to US$81.42 a barrel.

US copper futures declined on Thursday. Copper for July delivery HGN0 shed nearly 1.1%to US$3.1170 per pound on the New York Mercantile Exchange's COMEX division.

Businesswire.co.nz

Comments from our readers

No comments yet