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02/11
Stocks slip as risk appetite wanes
Global equities were lower after well-received corporate earnings reports were overshadowed by renewed geopolitical concerns.
After modest gains in Asian and European morning trade, equity markets turned frosty after markets in New York opened lower. The dollar and higher quality government bonds – Treasuries, UK Gilts and German Bunds – were sought as investor sentiment towards risk cooled.
Political unrest continued to spread in the Middle East and north Africa, with at least two protesters killed as Bahrain police broke up makeshift camps of demonstrators. Riots in Libya have also been exercising traders’ minds, while Iran was reported to be sending warships through the Suez Canal.
Peripheral Europe was back in focus after a lukewarm response to a Spanish auction of government debt. The bond sale failed to raise as much as hoped because of a decline in demand. The result was a rise in yields for the first time in three days, pushing the Spanish 10-year yield up 5.8 basis points to 5.37 per cent.
Meanwhile, Portugal’s 10-year government bond yields jumped 7.6bp to 7.26 per cent after local paper Jornal de Negócios suggested Lisbon was coming under renewed pressure from Germany to accept a bail-out.
Earlier, Angel Gurría, secretary-general of the Organisation for Economic Co-operation and Development, said Spain and Portugal had been “absolutely exemplary” in the measures they adopted to address their fiscal problems.
On Wall Street, the Dow Jones Industrial Average opened 0.3 per cent lower at 12,256.76, while the S&P 500 shed 0.2 per cent 1,333.24.
In Europe, strong results from Nestlé, Capgemini and Solvay failed to keep the main FTSE Eurofirst 300 index in positive mood, and it shed earlier gains to stand 0.3 per cent lower at 1,183.73.
London’s FTSE 100 slipped 0.2 per cent to 6,070.46 as miners fell back in line with losses on commodity markets, offsetting the positive impact of financial sector gains.
Asian trade delivered modest gains as Japanese technology companies benefited from the yen’s recent weakness, helping the FTSE Asia Pacific index advance 0.7 per cent to 266.71.
Commodities – Tensions in the Middle East helped keep oil supported on fears that supplies to Europe may be disrupted. Nymex WTI, however, partially reversed Wednesday’s gains, taking its discount to Brent to a new record just under $20.
High inventories in the US hub have kept a lid on Nymex gains, while the UK contract reflects the global supply/demand position and is therefore seen as a better gauge for trading any complications from Middle East political tensions. Brent added 40 cents to $104.10.
Forex – The dollar found a little support as the political unrest in the Middle East cast a shadow over sentiment, but did not do enough to break it out of its recent trading range. And signs that the Federal Reserve remained unhappy with the number of jobs created by the US economy left traders convinced that the central bank would complete its planned $600bn purchase of government bonds. The dollar index slipped 0.1 per cent to 78.264, having earlier hit a week low of 78.048.
Additional reporting by Song Jung-a in Seoul and Telis Demos in New York