Wednesday, November 23, 2011

GLOBAL MARKETS-US stocks down 5th day; IMF move lifts euro

NEW YORK(Nov 22):'' U.S. stocks fell for a fifth straight day on Tuesday, extending losses from across Europe, after worries over U.S. economic growth, while the euro rose on a new IMF initiative to contain Europe's debt crisis.

The U.S. government said the U.S. economy grew at a 2 percent annual rate in the third quarter, below the initial estimate of a 2.5 percent growth rate, and below expectations for a 2.5 percent reading.

The euro climbed above $1.35 after the International Monetary Fund beefed up its lending instruments and unveiled a new six-month liquidity line to help countries with solid policies that may be at risk from the euro-zone crisis.

Trade in the euro was volatile as many investors viewed high borrowing costs for both Spain and Italy as unsustainable. With little confidence in official efforts to build a bailout fund big enough to rescue the countries, trust between banks holding their debt vanished, causing lending to dry up.

Euro-zone banks increased their borrowing at the European Central Bank to the highest level in two years on Tuesday. Record-high yields at a Spanish debt auction helped drive down European shares for a fourth straight session.

"U.S. economic data proved a huge miss, which does not contribute to positive sentiment," said Michael Woolfolk, managing director at BNY Mellon Global Markets in New York.

Concerns that politicians are failing to tackle huge debt burdens also weighed a day after a special U.S. congressional committee said it failed to reach a deal on reducing government deficits.

Investors are worried the stalemate will make it more difficult to pass extensions of measures like payroll-tax cuts that could help stimulate the economy.

"The market is pretty much in the wait-and-see mode now," said Mark Lamkin, chief investment strategist at Lamkin Wealth Management in Louisville, Kentucky.

"The politicans here and overseas need to show more efforts in terms of what they are going to do" for the market to see a sustained rally, he said.

The Dow Jones industrial average fell 53.59 points, or 0.46 percent, to end at 11,493.72. The Standard & Poor's 500 Index slipped 4.94 points, or 0.41 percent, to finish at 1,188.04. The Nasdaq Composite Index dipped 1.86 points, or 0.07 percent, to close at 2,521.28.

Shares of computer and printer maker Hewlett-Packard Co ended down almost 1 percent at $26.65. The stock fell 4 percent earlier, to $25.25, to become the Dow's worst performer after HP gave a 2012 profit outlook that was below consensus.

The release of minutes from the Federal Reserve's meeting earlier this month had little impact on markets.The minutes showed that most policy-makers supported giving the public more detail about the likely path of monetary policy and interest rates, but rejected the idea of tying their actions to targets for growth or the price level.

In Europe, the FTSEurofirst 300 index ended down 0.6 percent at 914.19. An index of world stocks, measured by MSCI dropped 0.3 percent.


U.S. Treasuries' prices advanced as stocks declined and the Fed indicated it might consider further stimulus. The benchmark 10-year Treasury note reversed early losses to gain 7/32 in price, yielding 1.93 percent, down from 1.95 percent on Monday.

Commodity prices rose, with oil up in choppy trade as efforts to strengthen sanctions on Iran and unrest in the region hiked the geopolitical fear premium and offset worries about global economic growth.

U.S. crude oil settled at $98.01 a barrel, up $1.09, or 1.12 percent, and snapping a three-day losing streak. Copper also rose on signs of stronger buying, particularly from Asia, and gold prices climbed.


In government debt markets, Spain's Treasury paid the highest yields in 14 years to issue short-term bills, heaping pressure on center-right Prime Minister-elect Mariano Rajoy to soothe nervous markets by fleshing out austerity plans following Sunday's emphatic election victory.

Money market funds have cut their total exposure to European banks by 42 percent since the end of May, straining those banks' funding capabilities and forcing them to go to the European Central Bank as its lender of last resort for short-term funds, according to a report from Fitch Ratings.

The ECB's weekly limit-free handout of funding underscored the widespread problems on Tuesday with 178 banks requesting a total of 247 billion euros. That was the highest since mid-2009.

Three-month Euribor rates, traditionally the main gauge of unsecured interbank euro lending and a mix of interest-rate expectations and banks' appetite for lending, fixed unchanged at 1.467 percent just before the results of the ECB's operation. Six-month rates edged up to 1.695 percent from 1.694 percent while 12-month rates were fractionally higher at 2.030 percent, from 2.029 percent.- Reuters

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