Logo

Passionate about investing

Broadgate: Market News 26/6

26 June 2012

Stocks fell sharply on Monday, putting the S&P 500 near break-even for June so far, as investors saw little reason to be optimistic about a European Union summit this week.

Markets remain sensitive to European headlines as the region’s spiraling debt crisis could wreak further havoc on a slowing global economy.

Financial and energy stocks were among the primary drags. U.S. crude futures lost 0.7 percent to remain near the eight-month low hit last week. News that Spain had requested help for its struggling banks pressured financial stocks.

The PHLX oil service sector index dropped 3.4 percent and the KBW bank index .BKX slumped 2.7 percent.

Expectations for the two-day summit, which starts on Thursday, are low after Germany resisted pressure for common euro zone bonds or a flexible use of Europe’s rescue funds at a meeting of the region’s four biggest economies last week.

“Last week we were very hopeful that they were moving forward and the meetings this week would have a positive ending. Today there is a lot of doubt the EU summit will generate anything substantial,” said Gail Dudack, chief investment strategist for Dudack Research Group in New York.

Austerity measures pushed forward by Germany have Greece mired in a long recession. Investors worry Spain could be the next domino to fall as Madrid’s borrowing costs remain stubbornly high.

Among individual stocks, Chesapeake fell 8.5 percent to $17.03 as the worst performer on the benchmark S&P 500 index. Reuters reported that under the direction of Chief Executive Aubrey McClendon, the company plotted with its top competitor to suppress land prices in one of America’s most promising oil and gas locations.

The Dow Jones industrial average dropped 137.97 points, or 1.09 percent, to 12,502.81. The Standard & Poor’s 500 Index lost 21.30 points, or 1.60 percent, to 1,313.72. The Nasdaq Composite Index declined 56.26 points, or 1.95 percent, to 2,836.16.

For the month, the Dow is up 0.88 percent while the S&P 500 is up 0.26 percent. The Nasdaq is up 0.31 percent.

Spain formally requested euro zone rescue loans for up to 100 billion euros ($125 billion) to recapitalize its banks, saying the final amount of assistance would be set at a later stage. Some market economists say it is merely a prelude to a full bailout for Spain.

Spanish government bonds came under pressure with the 10-year bond yield up almost 30 basis points at 6.64 percent, near the 7-percent mark that forced other indebted European countries to ask for bailouts.

A European equity benchmark fell 1.6 percent and the dollar, seen as a safe-haven when European markets are volatile, rose as worries about global growth lingered after last week’s soft data on manufacturing worldwide.

New U.S. single-family home sales surged in May to a seasonally adjusted 369,000-unit annual rate, the highest since April 2010, and prices rose from a year ago amid tightening supply. But the European concerns outweighed any signs of life in the long-struggling industry as a homebuilding index fell 1.6 percent.

Wal-Mart Stores Inc was the lone advancer on the Dow. Walmart Canada said the company is opening of 47 hiring centers across Canada to support its growth plans. The stock rose 1.3 percent to $68.18.

Volume was light with about 5.84 billion shares traded on the New York Stock Exchange, NYSE Amex and Nasdaq, well below the daily average of 6.85 billion.

Declining stocks outnumbered advancing ones on the NYSE by 2,319 to 686, while on the Nasdaq, decliners beat advancers 1,868 to 649.

Commodities

Brent crude held steady above $91 per barrel on Tuesday as short-covering and forecasts of a drop in U.S. crude inventories offset worries that a European summit would be unable to produce a concrete solution to the region’s debt crisis.

Brent crude was at $90.86 a barrel by 0434 GMT, down 15 cents. U.S. crude fell 25 cents to $78.96.

Gold held steady above $1,580 an ounce on Tuesday after rising in the previous session as growing uncertainty on whether a key European Union summit this week will be able to resolve the region’s debt crisis supported the precious metal.

Gold hardly changed at $1,584.32 an ounce 10:46 p.m. EDT (0246 GMT), within sight of an intraday high around $1,587 hit on Monday, when Cyprus announced it was seeking a lifeline for its banks and its budget.

U.S. gold for August delivery slipped $3.20 an ounce to $1,585.20.

Currencies

The euro traded 0.3 percent from a two-week low against the dollar amid concern that a European Union summit this week will fail to produce decisive measures to end the currency bloc’s debt crisis.

The euro traded at $1.2506 at 12:58 p.m. in Tokyo from $1.2504 at the close in New York yesterday, when it touched $1.2471, the weakest since June 12. It fetched 80.30 U.K. pence from 80.29 pence, following a 0.4 percent decline yesterday. The yen added 0.2 percent to 99.46 per euro and to 79.53 against the dollar.

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.

Clientservices@broadgatefinancial.com