US Markets

A stock-market rally evaporated late in Thursday's session as investors fixated on Washington's debt-ceiling impasse, overshadowing better-than-expected jobs data. The Dow Jones Industrial Average finished 62.44 points lower, or 0.51%, at 12240.11, the blue-chip measure's fifth straight loss. The Standard & Poor's 500-stock index shed 4.22 points, or 0.32%, to 1300.67, led lower by telecommunications stocks. The Nasdaq Composite eked out a 1.46 gain, or 0.05%, to 2766.25.

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The stalling of the U.S. debt-ceiling debates has convinced many investors that the government is on track to lose its coveted triple-A credit rating. Investor attention intensified late Thursday as House Republican leaders debated their latest proposal to cut spending and increase the borrowing limit, aiming for an evening vote. The action follows weeks of squabbling between the White House and Congress. The selloff has put stocks on track for their steepest weekly loss in a year. Thursday's losses sent the blue-chip Dow down a cumulative 484 points during the current five-day skid that stretches to last Friday.

Sentiment was higher Thursday morning after data showed an unexpected drop in weekly jobless claims last week, with the claims figure dropping below 400,000 for the first time since early April. Though still at a high level, economists generally think the economy is adding more jobs than it is shedding once the weekly claims figure falls below 400,000. Despite the market's recent malaise, many investors still hold out hope that a pact to raise the debt ceiling and stave off default will be reached soon. AT&T led blue-chip decliners as it shed 2.3%.

Telecommunications stocks were weak after Sprint Nextel reported a wider loss in the second quarter and confirmed a 15-year agreement with privately held LightSquared to build and operate a high-speed wireless network. Sprint plunged 16%. Exxon Mobil was also weak, falling 2.2% after posting a lower than expected rise in second-quarter profits. Cisco Systems rose 2% to lead blue-chip gainers, after Goldman Sachs analysts said sales growth was set to rebound in 2012.

Microsoft was also strong, rising 1.4%. Among other earnings-related movers, Akamai Technologies dropped 19%, Green Mountain Coffee Roasters surged 16%, Murphy Oil slid 4.5% and LSI Corp. climbed 14%. In other U.S. economic data, the National Association of Realtors's index for pending home sales increased 2.4% on a monthly basis, beating economists' expectations for a decline. The housing market remains another economic sore spot, with overall levels well below what is normally seen in an economic recovery.

European Markets

European stocks markets were mixed on Thursday, weighed down by debt strains in the United States, but reassured by earnings news while the euro fell against the dollar. London's benchmark FTSE 100 index of top shares was up 0.28 percent at 5,873.21 points. In Frankfurt, the DAX fell 0.86 percent to 7,190.06 points and in Paris the CAC 40 dropped 0.57 percent to 3,712.66 points. The decision by Standard & Poor's to further downgrade Greece's credit rating weighed on sentiment, especially on the foreign exchange market.

While the downgrade and default warning was not unexpected, the ratings agency put more pressure on eurozone leaders and private investors to finalise the exact framework of the second rescue agreed last week. Italy came under fire amid signs of government infighting and fears the eurozone's third biggest economy could join Greece, Ireland and Portugal into a debt spiral.

The White House and Democrats and their Republican rivals continue to bicker over a deficit-slashing plan that would allow a hike in the US debt ceiling, despite the government running out of money to pay its bills within a week. In London, Royal Dutch Shell said that net profits almost doubled to $8.6 billion in April-June as improved income from high oil prices offset a drop in output. However its share price was slightly down 0.62 percent at close.

In Frankfurt, Volkswagen shed 4.17 percent even though Europe's biggest car maker said its net profit tripled in the first half. Investors were disappointed that VW did not give a detailed increased outlook for the year however. French telecom equipment group Alcatel-Lucent meanwhile plunged 15.33 percent as its return to profit in the second quarter was weaker than expected. The company was back in the black after years of problems, with net profits of 43 million euros from April to June.

Asian Markets

Most Asian markets ended lower Thursday, amid growing concern the U.S. will be unable to resolve an impasse in negotiations on raising its debt ceiling, which could spur a credit downgrade or even a debt default. The Nikkei Stock Average ended down 1.5% at 9901.35, while Australia's S&P/ASX 200 fell 1.6% to 4463.8, South Korea's Kospi lost 0.9% to 2155.85, the Shanghai Composite shed 0.5% to 2708.78 and India's Sensex fell 1.2% to 10209.52. Hong Kong's Hang Seng Index fought the tide, erasing early losses with a late surge that left it up 0.1% at 22570.74. Tchnology stocks fell around the region, tracking their U.S. counterparts.

In Tokyo, chip-equipment maker Advantest shed 6.9% after posting a lower quarterly profit and delivering a downbeat outlook; that weighed on peer Elpida Memory, which fell 4.8%. LG Electronics ended 2.7% lower and Hynix Semiconductor 1.1% lower in South Korea. Panasonic managed to buck the market downtrend, rising 0.5% amid reports it would sell its Sanyo Electric home-appliance units to China's Haier Electronics Group. Haier shares fell 1.6% in Hong Kong. Japanese exporters were broadly lower after a drop in U.S. durable-goods orders for June raised questions about future demand, and as the dollar stayed stubbornly below the (Yen)78 mark Thursday.

Honda Motor ended the day down 1.9%, while Fujitsu fell 1.5%. Hong Kong-listed exporters were also mostly weaker, with Li & Fung Ltd. down 3.8%, and Lenovo Group falling 2.5%, while ports operator Cosco Pacific lost 1.1% on global economic concerns. But some Hong Kong-listed real-estate stocks managed late gains, building on advances in the previous session. China Overseas Land & Investment added 1.4%, while Hang Lung Properties improved by 0.5%. Australia's Macquarie Group dropped 4.6% after the firm said its fiscal first-half result would likely be lower than that of the year-earlier period, although it stuck to its fiscal-year guidance. Sensex fell 0.1% to 18384.90 and Singapore's Straits Times

Base Metals

Base metals saw a mixed close on the London Metal Exchange Thursday, as investors exercised caution ahead of a closely-watched vote on U.S. debt, while a stronger greenback and poor economic indicators from Europe damped appetite for base metals.

At the close, LME three-month copper was just 0.4% higher at $9,814/ton, having traded in a tight range for most of the session. Lead lost the most ground, falling 1.3% at $2,655/ton.

Crude-oil futures edged higher Thursday after flip-flopping most of floor trading, as data pointed to some improvement in the outlook for jobs and housing but the dollar rose and the debate over the U.S. debt-ceiling debate continued in Washington.

Tropical Storm Don brewed in the Gulf of Mexico and also provided support to prices as some companies began cutting down production and asking workers to leave the area. Crude for September delivery added 4 cents to settle at $97.44 a barrel on the New York Mercantile Exchange. It traded as high as $98.01 a barrel and as low as $96.51 a barrel, according to FactSet Research. Natural-gas futures led losses among energy products after a weekly government report showed a larger than expected increase in supplies.

Gold futures inched lower, leaving behind their latest string of records, as the dollar rose and Thursday's economic reports had a benign impact. Concerns about lack of a legislative resolution in the U.S. debt-ceiling standoff kept a floor under prices, however. Gold for December delivery, the most actively traded contract, declined $1.10, or 0.1%, to $1,616.20 an ounce on the Comex division of the New York Mercantile Exchange.

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