Global Markets Overview 07/19/2011
US Markets
U.S. stocks fell to their lowest close this month Monday as fresh jitters over European sovereign debt and the lack of progress in U.S. debt ceiling negotiations sparked a flight from risky assets. The Dow Jones Industrial Average finished 94.57 points lower, or 0.76%, at 12385.16, the lowest close since June 29. Monday's drop comes after the Dow suffered its worst week since that ended June 10. The Standard & Poor's 500-stock index fell 10.70 points, or 0.81%, to 1305.44, the measure's lowest finish since June 28. The Nasdaq Composite slid 24.69 points, or 0.89%, to 2765.11.
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A slump in European markets helped set the tone amid growing concern that the continent's bank stress tests weren't stringent enough. The tests, the results of which were released Friday, failed to account for a Greek debt-default scenario that is seen as posing a systemic risk for large European lenders, market participants said.
Meanwhile, in the U.S., there were few signs of a breakthrough in Washington's debt negotiations, which weighed on sentiment. Even though most investors consider the chance of a government default to be small, the mere thought spurs anxiety.
Financial stocks were the weakest sector in the S&P 500, following a plunge in European bank stocks. Materials and industrial shares were also weak. Bank of America was the worst performer among blue-chip stocks, falling 2.8%.
Boeing was also weak, losing 2.4%. Halliburton rallied early but finished just 0.1% higher after the energy-services company reported second-quarter earnings and revenue that topped forecasts.
European Markets
European stock markets slumped Monday, with banks falling sharply on disappointment that recent stress tests didn't address key worst case scenarios, while sovereign-debt worries added to the selling pressure. The Stoxx Europe 600 index fell 1.8% to end at 262.10. It posted a 2.5% loss last week, its worst weekly performance since the week ended March 18.
Banks across Europe tumbled, with ING Group down 7.1% in Amsterdam and Intesa Sanpaolo SpA down 6.5% in Milan. The losses came as investors got their first chance to react to the results of a second round of European-bank stress tests, released after the close of trading Friday. The European Banking Authority said eight banks failed the tests, for a combined capital shortfall of EUR2.5 billion, while 16 narrowly passed.
The overall verdict from analysts was the tests lacked in credibility. Shares of Royal Bank of Scotland Group PLC fell 6%, while Barclays PLC dropped 7% and Lloyds Banking Group PLC fell 7.5%. The losses weighed on the FTSE 100 index, which closed down 1.6% at 5,752.81.
The German DAX 30 index dropped 1.6% to 7,107.92, pressured by falls for Deutsche Bank AG shares, down 3.5%, and Commerzbank AG, down 4.6%. France's CAC 40 index fell 2% to 3,650.71, with shares of Societe Generale down 5.5% and BNP Paribas SA down 3.6%. Insurer AXA SA lost 5.4%. Big losses were also seen in Italy, where the FTSE MIB index dropped 3.1%. Shares of Banco Popolare SC fell 6.7% and those of UniCredit SpA closed down 6.4%.
The declines for Italian shares come amid growing concerns that the debt crisis will spread to bigger euro-zone economies such as Spain and Italy.
Spanish and Italian bond yields climbed Monday, as rifts appeared ahead of Thursday's summit of euro-zone leaders aimed at finalizing a second aid package for Greece. German Chancellor Angela Merkel reportedly said she wouldn't attend unless there was agreement over a Greek rescue plan. Meanwhile, European Central Bank President Jean-Claude Trichet, in an interview with Financial Times Deutschland, reiterated that bonds of a defaulted country couldn't be accepted as collateral.
ASIAN Markets
Asian stock markets ended mostly lower Monday as concerns over U.S. and European sovereign debt issues kept investors wary. Hong Kong's Hang Seng Index ended 0.3% lower at 21804.75, while China's Shanghai Composite Index slipped 0.1% to 2816.69. South Korea's Kospi fell 0.7% to 2130.48, Taiwan's main index was down 0.4% at 8538.57 and India's Sensex fell 0.3% to 18507.04.
Japanese markets were closed for a holiday. A number of shares in the region fell on company- or stock-specific news or worries. Decliners included Citic Pacific, which fell 8.5% in Hong Kong after the company informed the stock exchange of a delay in production at its iron-ore mine in Australia. HTC, despite a share-buyback announcement, declined 4% in Taipei after a preliminary ruling from the U.S.
International Trade Commission that the smartphone maker infringed on two Apple patents. Banks around the region were mixed after officials announced Friday that some of the 90 European banks going through a second round of stress tests failed, although the largest banks passed. HSBC Holdings dropped 0.7% and Standard Chartered PLC rose 0.1% in Hong Kong, while KB Financial Group lost 0.4% in Seoul.
Investors were also worried about U.S. debt issues, after the weekend saw little progress on talks to raise the country's debt limit by an Aug. 2 deadline. Some export-focused firms fell, including some South Korean exporters, with Samsung Electronics down 2.3% and Hyundai Motor down 1.5%.
BASE Metals
Base metals on the London Metal Exchange closed mostly higher but largely in range Monday as investors awaited fresh news on the euro-zone debt crisis and U.S. debt negotiations. Three-month copper finished the session at $9,694 a metric ton, up 0.2% on Friday's PM kerb close but well off its earlier high of $9,735/ton. Oil futures finished lower Monday as worries about Europe's debt crisis sent the dollar rallying against the euro and prompted concerns about weakening crude demand.
Light, sweet crude for August delivery settled down $1.31, or 1.4%, at $95.93 a barrel on the New York Mercantile Exchange. Brent crude on ICE Futures Europe exchange traded down $1.23, or 1.1%, at $116.03 a barrel. Nymex crude fell to as low as $94.69 a barrel intraday amid fears that Europe's sovereign-debt crisis was spreading. Last week's stress test of European banks, which critics called too lenient, did little to calm nerves.
Gold settled above $1,600 for the first time Monday as debt concerns in Europe and the U.S. elevated investor demand for a safe-haven investment.
The most actively traded contract, for August delivery, gained $12.30, or 0.8%, to settle at a record $1,602.40 a troy ounce on the Comex division of the New York Mercantile Exchange. July-delivery gold rallied $12.30, or 0.8%, to settle at $1,602.10 a troy ounce, also a record.
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