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While you were sleeping Wall St edges lower

Tuesday 31st July 2012

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Investors have begun the week cautiously, reluctant to place big bets before meetings of policymakers in the US, the euro zone and the UK in the coming days.

European Central Bank President Mario Draghi last week promised that the central bank, within its mandate, was "ready to do whatever it takes to preserve the euro," adding, "and believe me, it will be enough."

Germany's Angela Merkel and France's Francois Hollande echoed Draghi's sentiment. While that still provided support for the stocks in the region today, the euro gave up some of last week's gains as it weakened 0.6 percent against the greenback.

Europe's Stoxx 600 Index ended the day with a 1.6 percent climb from the previous close.

As a sign of the continuing tough times for global banks, HSBC has set aside US$700 million to cover fines and other costs after a US Senate report criticised it this month for letting clients shift funds from dangerous and secretive countries, notably Mexico.

Chief Executive Stuart Gulliver told reporters the ultimate cost could be "significantly higher".

Several banks under investigation for suspected rigging of euro interest rates are cooperating with European Union antitrust regulators in the hope of lower fines, two people familiar with the matter told Reuters, a move which puts the lenders at a higher risk of lawsuits.

Italy auctioned 5.48 billion euros of bonds. The Rome-based Treasury priced the 10-year debt to yield 5.96 percent, down from 6.19 percent on June 28, and its 5-year bond to yield 5.29 percent, compared with 5.84 percent last month, according to Bloomberg.

Spanish bond yields also fell amid expectations the ECB will buy them to help ease the cost of borrowing.

"The main driver of Spanish and Italian bonds is the hope that we will see some concerted action" to help stem the debt crisis, Christopher Rieger, head of interest-rate strategy at Commerzbank in Frankfurt, told Bloomberg. "The risk is high that these hopes will be disappointed. We may not get all the details this week and so the market will probably remain volatile."

US Treasury Secretary Timothy Geithner and German Finance Minister Wolfgang Schaeuble met and backed a commitment by European leaders to do everything needed to defend the euro area while failing to mention its weakest link, Greece.

Wall Street, meanwhile, was even a little more cautious ahead of the Federal Open Market Committee's two-day meeting starting tomorrow.

In late afternoon trading in New York, the Dow Jones Industrial Average edged 0.04 percent lower, the Standard & Poor's 500 Index fell 0.12 percent, while the Nasdaq Composite Index shed 0.46 percent.

One bright note: shares of Shaw Group soared 55 percent after Chicago Bridge & Iron agreed to buy the company for about US$3 billion.

Bond Offer: Infratil Ltd, 7.2 year & 10.2 year unsecured unsubordinated bond

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