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Broadgate: Market News 12/6

12 June 2012

U.S. stocks fell, following the biggest weekly rally in the Standard & Poor’s 500 Index this year, as optimism over Spain’s bailout plan gave way to skepticism it will succeed in halting the debt crisis.

Equities extended losses as Apple Inc., the world’s most valuable company, slumped 1.6 percent after updating its MacBook line of laptops and announcing new iPhone features. Bank of America Corp. and Morgan Stanley slid at least 2.4 percent. AK Steel Holding Corp. lost 14 percent as Goldman Sachs Group Inc. said there is “no relief in sight” for a drop in the metal.

The S&P 500 fell 1.3 percent to 1,308.93 at 4 p.m. New York time, after futures on the index surged as much as 1.5 percent following Spain’s request. It climbed 3.7 percent last week. The Dow Jones Industrial Average lost 142.97 points, or 1.1 percent, to 12,411.23. The Russell 2000 Index of small companies slid 2.4 percent. The Nasdaq Composite Index lost 1.7 percent. Trading volume for exchange-listed stocks in the U.S. was about 6.1 billion shares, 9.5 percent below the three-month average.

“The uncertainty remains,” John Carey, who helps oversee about $220 billion at Pioneer Investments in Boston, said in a telephone interview. “People are looking at the Spanish action as the first of what might be a number of steps or just a partial response to the needs of Europe’s debt crisis.”

Spain requested as much as 100 billion euros ($125 billion) of European bailout funds to shore up its banking system. The crisis in Spain, coinciding with the prospect of Greece leaving the euro after elections on June 17, roiled markets around the world, sending the euro to an almost two-year low on June 1 and pushing Spanish borrowing costs to near euro-era records.

European stocks erased gains in the final hour of trading, led by a selloff in Spanish and Italian lenders, as optimism faded that Spain’s 100 billion euro ($125 billion) bank bailout will contain the sovereign debt crisis.

Banco Santander SA (SAN) and Banco Bilbao Vizcaya Argentaria SA erased gains after Fitch Ratings Services downgraded Spain’s two biggest lenders. UniCredit SpA and Intesa Sanpaolo SpA both tumbled more than 5 percent as bond yields rose. Volkswagen AG paced advancing shares.

The Stoxx 600 was little changed at 241.92 at the close of trading after rallying as much as 1.9 percent earlier. The gauge climbed 2.9 percent last week after China cut interest rates and the European Central Bank said it’s ready to add more stimulus if the economy worsens.

“We are not prepared to add risk at this stage,” said Bill O’Neill, chief investment officer for Europe, the Middle East and Africa at Merrill Lynch Wealth Management, on Bloomberg Television. “Getting the deal right in Spain is the key litmus test of success with turning the euro crisis around.”

The Stoxx 600 initially rallied after Spain asked euro-area governments for funds to bail out its banks, making it the fourth member of the currency bloc to seek a rescue since the debt crisis began almost three years ago.

Commodities

Brent slipped as low as $96.62 a barrel, close to the low for the year of $95.63, struck on June 4. It was trading 79 cents lower at $97.21 by 0311 GMT. U.S. oil was down 90 cents at $81.80 a barrel after dropping to a low for the year at $81.07. Both contracts have fallen for the fourth day.

Spot gold inched down 0.1 percent to $1,592.79 an ounce by 0350 GMT. U.S. gold futures for August delivery lost 0.2 percent to $1,594. Gold buyers have pinned hope on more Fed stimulus, which would help the metal attract investors who are concerned about the threat of higher inflation

Currencies

The yen lost 0.3 percent to 99.44 per euro as of 1:17 p.m. in Tokyo after rising as much as 0.4 percent. It fell 0.1 percent to 79.55 per dollar. The euro added 0.2 percent to $1.2502 after falling 0.3 percent to $1.2482 yesterday.

Japan’s currency has jumped 8.1 percent in the past 12 months, according to Bloomberg Correlation-Weighted Indexes tracking 10 developed-nation currencies. Only the dollar rose by more, with an 8.7 percent advance, while the euro has slid 6.3 percent.

The information set out herein has been obtained from various public sources and is by way of information only. Broadgate Financial can accept no liability of any sort in relation thereto and readers should obtain their own verification of any statement before making any decision which may have any financial or other impact.

Neither the information nor the opinions herein constitute, or are they to be construed as, an offer or a solicitation of an offer to buy or sell investments.

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