Euro, Wall St fall on ECB, Fed minutes
Traders work on the floor of the New York Stock Exchange, May 15, 2012. — Reuters picNEW YORK, May 17 — US stocks and the euro slid yesterday on news that some Greek banks face emergency funding needs, while minutes from the Federal Reserve’s April meeting showed US economic prospects remain sobering.
The European Central Bank stopped funding operations for some Greek banks as they are undercapitalised, the ECB said, confirming a Reuters report that had fanned concerns about Greece’s financial difficulties.
The funding needs highlighted the weak state of the banking sector in Greece, where many Greeks are withdrawing money out of fear their country may soon leave the euro zone.
The euro slid and shares in Europe closed lower in choppy trading as worries mounted over the stability of the euro zone. Greece plans to hold fresh elections in mid-June that likely will determine whether it remains in the common currency area.
“All eyes continue to be trained on Europe, what is going to happen in Greece, what the potential fallout from that is going to be,” said Stephen Massocca, managing director at Wedbush Morgan in San Francisco.
The Dow Jones industrial average closed down 33.45 points, or 0.26 per cent, at 12,598.55. The Standard & Poor’s 500 Index fell 5.86 points, or 0.44 per cent, at 1,324.80. The Nasdaq Composite Index shed 19.72 points, or 0.68 per cent, at 2,874.04.
Efforts by German Chancellor Angela Merkel and new French President Francois Hollande to quell talk of a possible Greek exit from the euro zone bolstered sentiment for much of the day.
But US stocks retreated on the ECB news and the Fed minutes, which showed several members of the US central bank’s policy-setting committee had indicated that additional monetary policy accommodation could still be necessary.
MSCI’s all-country world equity index fell one per cent to 304.70.
Data showing US industrial production posted its fastest growth in over a year in April and a surge in groundbreaking for new homes that suggested a rebound in US housing was gaining some traction had spurred early US stock market gains.
Investors have also turned to Treasuries and other perceived safe-haven assets, however, on signs of slowing growth in China and jitters about banking in the wake of the US$2 billion trading loss at JPMorgan Chase & Co, traders and analysts said.
“The (Treasuries) market is long and traders see the mess in Europe won’t be resolved for a long time,” said Thomas Roth, executive director of US government bond trading at Mitsubishi UFJ Securities USA in New York. “The market is priced for Armageddon.”
The benchmark 10-year Treasury note rebounded, rising 3/32 in price to yield 1.76 per cent. The 30-year US Treasury bond rose 13/32 in price to yield 2.90 per cent.
The euro slid for a fourth straight session, dropping to a four-month low against the US dollar.
The euro was down 0.13 per cent at US$1.2713. The dollar index, a basket measuring the greenback’s strength against other major currencies, rose 0.23 per cent to 81.405.
Crude oil futures tumbled as risk aversion spread across markets following the report on Greek banks.
Brent crude settled down 53 cents at US$111.71 (RM335) a barrel while US oil settled down US$1.17 to US$92.81.
Gold sank to a 2012 low before paring losses in choppy trade, torn between hope that France and Germany would work to keep the euro zone intact and the signs of stress in the Greek banking sector.
US gold futures for June delivery slid 1.2 per cent to US$1,538.86 an ounce, hitting the lowest price for a most-active contract since July. — Reuters
