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Markets News Afternoon: Stocks slide in Europe and US as sovereign debt worries rise; Euro below $1.38; Trichet says ECB’s interest rate are “appropriate”
By Finfacts Team
Feb 4, 2010 - 5:01:08 PM
Stocks fell in Europe and the US Thursday as macroeconomic issues came to the fore with The Wall Street Journal reporting that the cost of insuring the debt of Eurozone members with large budget deficits against default rose, dashing hopes that the European Commission's qualified endorsement of Greece's budget plan would calm investor fears. Greece, Portugal and Spain were in focus, with their five-year sovereign credit default spreads moving sharply wider.
Greece's five-year sovereign credit default swap spreads rose to 4.23 percentage points, compared with Wednesday's closing level of 3.97 percentage points, according to CMA DataVision. That means the annual cost of insuring €10 million of Greek government debt against default for five years had risen €26,000 to €423,000.
Bloomberg reports that the MSCI World Index of 23 developed markets sank 2.2%, the most since Oct. 1st, while Spain’s Ibex 35 Index retreated almost 6%.
European Central Bank President Jean- Claude Trichet said today he’s confident Greece can get its budget deficit under control and signaled the benchmark interest rate will remain at 1% for many more months.
“We expect and we are confident that the Greek government will take all the decisions that will permit them to reach that goal” of cutting the deficit to the euro stability limit of 3%, Trichet said at a press conference in Frankfurt today. He termed ECB’s interest rate are “appropriate” and said big banks such as Deutsche Bank and Banco Santander who reported strong earnings today should concentrated on strengthening their balance sheets and easing credit rather than raising dividends and staff bonuses.
US
US labour productivity jumped in the fourth quarter of 2009 as companies expanded output with recession depleted workforces.
A measure of employee output per hour rose at a 6.2%, which was the biggest one-year gain since 2003, the Labor Department said today in Washington. Labor costs dropped at a 4.4% rate and fell 0.9% for all of 2009, the biggest dip in seven years.
A look at why sovereign debt is turning into contagion in the Eurozone and how it will impact markets going forward, with Andrew Busch, of BMO Capital Markets, and David Dietze, of Point View Financial Services:
The Dow has fallen 186 points or 1.81% to 10,085.
The S&P 500 has dipped 2.04% and the Nasdaq is off 1.91%.
The number of people filing for US unemployment benefits rose unexpectedly last week. CNBC's Bertha Coombs looks at which states are suffering the most. Christian Weller, of the Center for American Progress, and Ray Hederman, of the Heritage Foundation, share their insight:
Oil
US Crude oil stockpiles fell by 3.9 million barrels to 326.7 million barrels for the week ended Jan. 22nd, according to the US Energy Information Administration today.
Inventories of crude oil are "just above the upper limit of the average range for this time of the year," the EIA said.
On the New York Mercantile Exchange, oil for March 2010 delivery is trading at $74.24 down $2.30 from Wednesday's close. In London, Brent crude for March delivery is trading at $73.23 a barrel.
Currencies
The euro fell below the $1.38 level today for the first time in more than seven months, as investors react to deficit concerns in Greece and Spain.
The euro dipped to a low as $1.3786 this afternoon, which was the lowest since June 2009.
The euro is trading at $1.3775 and at £0.8733.
For live currency updates, check the right-hand column of the Finfacts home page.The dollar traded at a record low $1.6038 per euro on July 15, 2008.
