World Market Overview
U.S. stocks recovered about half of their Monday losses in late-afternoon trade, bringing the Dow Jones Industrial Average back above 11,000, with financials faring the best. After a 120 point drop, the Dow Jones Industrial Average was recently off 58.32 points at 11,033.68. The S&P 500 was down 4.06 points at 1,185.34, and the Nasdaq Composite was off 14.97 points to 2,519.61.
Monday's declines came as investors continued to worry about the euro-zone debt situation even after Europe sealed a EUR67.5 billion ($89.43 billion) bailout of Ireland Sunday and for the first time crafted a blueprint for rescues that could have private sector creditors bearing some of the cost, starting in 2013.
Counting Ireland's own contribution, which is coming out of the state's treasury and its pension reserve fund, the total package is EUR85 billion, or $112.61 billion. Concerns remain as to whether Portugal or even Spain will also need help refinancing their debts. Adding to the concerns, the European Commission said it expects weak global markets and government efforts to cut deficits to bring a gradual and rather uneven recovery across the bloc's 27 member states.
European markets
European stocks ended sharply lower Monday, as an EUR85 billion bailout package for Ireland failed to ease fears that the euro-zone debt crisis will spread to Spain, Portugal and other nations. A lackluster Italian bond auction also helped sour the mood. Milan, Madrid and Lisbon led European markets lower, with financial shares coming under particularly heavy selling pressure.
The Stoxx Europe 600 index slumped 1.7% to end at 262.16. It had opened higher but quickly gave up those gains to trade sharply lower for most of the day. Italy's FTSE MIB index dropped 2.7%, posting the biggest decline among major regional indexes. In the financial sector, Banco Popolare and UBI Banca both tumbled nearly 5%.
In Spain, the IBEX 35 index lost 2.3%, as Banco Bilbao Vizcaya Argentaria SA fell 4.3%. Portugal's PSI 20 index slumped 2.2%. Stocks gained initially on news of the aid package for Ireland, but attention later shifted to the fact that the measures still didn't sort out some issues. Afseth noted, however, that whether a country is deemed solvent or not will need to be a unanimous decision, and thus open to political pressures. Of the main European indexes, France's CAC-40 index fell 2.5% to end at 3,636.96 and the U.K.'s FTSE 100 index slipped 2.1% to 5,550.95.
Germany's DAX 30 index declined 2.2% to end at 6,697.97. Auto stocks were at the forefront of the decline Monday, with shares of Daimler AG down 3.4% in Frankfurt and Peugeot SA down 3% in Paris. The telecom sector also came under pressure, with Vodafone Group dropping 3.6% and Telefonica SA falling 2.2%. In Ireland, the ISEQ index ended little changed, erasing most of its intraday gains. Irish financial stocks posted gains. Bank of Ireland rallied 16% and Allied Irish Banks PLC rose 3.8%.
Asian markets
Asian stock markets ended mostly higher Monday, with Tokyo's Nikkei Stock Average hitting a five month closing high as the outlook for exporters brightened, while South Korean stocks were pressured by continued tensions on the Korean peninsula. Japan's Nikkei Stock Average rose 0.9% to 10,125.99, its highest close since June 21.
South Korea's Kospi Composite slipped 0.3% and the Shanghai Composite Index shed 0.2%, while Hong Kong's Hang Seng Index advanced 1.3%, rebounding from losses early in the session. Tokyo investors were heartened by data pointing to upbeat U.S. retail sales this past weekend, which marks the unofficial start to the Christmas shopping season.
The U.S. dollar is likely to gain further ground against the yen, analysts said, amid the backdrop of stronger U.S. retail sales, tensions on the Korean peninsula and question marks over financial stability in the euro zone despite approval of a rescue package for Ireland.
Among exporters, Sony closed up 2.8%, Canon added 1.0% and Nintendo gained 2.4%. On the downside, South Korea stocks remained pressured by worries over tensions on the Korean peninsula, with some analysts believing geopolitical risk will continue to weigh on the market until the joint U.S. South Korea naval exercises, which began Sunday and are scheduled to last four days, wind down. Technology shares were mixed, with Samsung Electronics down 0.1% and chipmaker Hynix Semiconductor up 0.6%.
Base metals
Base metals closed broadly lower on the London Metal Exchange Monday after the euro weakened against the U.S. dollar and news of Ireland's bailout failed to ease worries over the euro-zone sovereign debt crisis. European ministers and the International Monetary Fund Sunday agreed loan facilities for Ireland of up to EUR85 billion but, following only a brief improvement in investor sentiment, the focus of the markets quickly turned to the potential for contagion to other euro-zone countries.
Crude oil futures settled higher Monday, with light, sweet crude for January delivery up $1.97 cents at $85.73 a barrel on the New York Mercantile Exchange. Oil prices held to early gains sparked by Europe's EUR85 billion rescue package for Ireland and the creation by the European Union of a blueprint for any future bailouts after 2013. Traders said oil's resilience suggests the supply and demand fundamentals of the oil market can support prices at the mid-$80 a barrel level, despite jitters in global markets that have led to flights from riskier assets, such as commodities.
Gold futures ended higher, a reversal of fortunes for the metal as investors feared more European sovereign debt bailouts in Europe. Gold for December delivery ended up $3.60, or 0.3%, at $1,366 an ounce on the Comex division of the New York Mercantile Exchange. Gold for February delivery, the most active contract, added $3.20 to $1,367.50 an ounce.
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