Wednesday, 1 December 2010

Europe's debt woes keep markets down

Investors remain concerned about European sovereign debt. From Bloomberg on Tuesday:

The MSCI World Index of stocks in 24 developed nations lost 0.6 percent at 4:31 p.m. New York time and the Standard & Poor’s 500 Index fell 0.6 percent, trimming its slide from 1.2 percent after President Barack Obama signaled willingness to work with Republicans to extend some Bush-era tax cuts. The euro slid below $1.30 for the first time since September. Costs to insure the debt of Italy, Spain, Portugal and Ireland reached records and yields on Belgium’s government bonds surged.

Stocks, government securities and the euro are being dragged down by concern Portugal and Spain may suffer the fate of Ireland, which had to ask for an 85 billion-euro ($111 billion) rescue package to help bail out its banks. S&P said today it may cut Portugal’s credit ratings on concern the government has made little progress on boosting economic growth to offset the fiscal drag from scheduled budget cuts.

Economic reports from Europe on Tuesday provided little boost for markets. From Bloomberg:

Euro-area consumer prices rose 1.9 percent in November from a year earlier, the European Union statistics office in Luxembourg said in an initial estimate today. The jobless rate increased to 10.1 percent in October, the highest since July 1998, from 10 percent in September.

There were positive reports from the US though. Again from Bloomberg:

The Institute for Supply Management-Chicago Inc. said today its business barometer rose to 62.5 this month, the highest since April, from 60.6 in October. Figures greater than 50 signal expansion. The median forecast of 63 economists surveyed by Bloomberg News projected the gauge would fall to 59.9...

Others reports today showed consumer confidence improved more than forecast and home prices cooled.

The Conference Board’s confidence index increased to 54.1, a five-month high, from a revised 49.9 in October, figures from the New York-based research group showed. Measures of employment and income expectations improved.

However, house price data disappointed.

Home prices in 20 cities rose in September at the slowest pace in eight months, showing the latest slump in sales is destabilizing housing. The S&P/Case-Shiller index of property values climbed 0.6 percent from September 2009, the smallest gain since January, the last time prices declined year over year. The increase was smaller than the 1 percent median forecast in a Bloomberg News survey of economists.

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