While you were sleeping: Banks lead global equities lower

Wednesday 16th December 2009

Bank stocks fell across Europe and in the U.S. amid concerns about credit quality and the prospect that the U.S. central bank would pave the way, as soon as tomorrow, for higher interest rates.

In early afternoon trading ,the Dow Jones Industrial Average fell 0.41%, the Standard & Poor’s 500 was down 0.42% and Nasdaq slid 0.11%.

Investors are turning their attention to the prospect of higher interest rates now that more data points to a strengthening economy. Today a report showed that U.S. industrial production rose a more than expected 0.8% in November.

Bank of America, JPMorgan Chase and Citigroup led the financial sector lower. Retailer Best Buy dropped 8.3% after forecasting a lower profit rate. Advancers included MetroPCS, Qwest and Weyerhaeuser.

The Chicago Board Options Exchange Volatility Index, or VIX, which is known as Wall Street’s ‘fear gauge’ rose 0.8 to 21.32.

In Europe, the Dow Jones Stoxx 600 was little changed at 247.17. A 56% rally since March 9 has left the benchmark gauge for European equities valued at about 56 times its companies’ reported earnings, near the highest level since 2003, weekly data compiled by Bloomberg show.

The FTSE 100 dropped 0.56%. In contrast, Germany’s DAX edged 0.16% higher and France’s CAC rose 0.1%.

Bank stocks fell in Ireland, Austria and Greece. Allied Irish Banks fell 5.7%, Bank of Ireland shed 2.3%, Raiffeisen International fell 5.8% and National Bank of Greece lost 4.9%.

The main focus for investors across equities, money and commodities markets is what the Federal Reserve’s policy making committee will say in a statement on Wednesday in Washington.

The Federal Open Market Committee will release a monetary policy statement at around 2:15pm tomorrow in Washington, with interest rates forecast to remain near zero. The focus will be on any change in language about the rate outlook.

The U.S. dollar gained 1% to US$1.4513 per euro. The dollar rose as much as 1.6% to 89.95 yen. The yen slid 0.4% to 130.42 per euro. The euro slid 0.5% to 89.41 U.K. pence.

Fed funds futures on the Chicago Board of Trade indicated today a 53% chance that the Fed will raise its target lending rate by at least a quarter-percentage point by its June meeting, compared with 48% odds yesterday, Bloomberg News reported.

All of the 97 economists in a Bloomberg survey forecast the Fed will keep the target lending rate at zero to 0.25% when it releases its statement tomorrow.

The Dollar Index, which measures the greenback against a basket of six major currencies, rose 0.86% to 77.01.

U.S. crude for January delivery rose US$1.10 to US$70.61 a barrel by 1:19 p.m. EST (1819 GMT). In London, Brent crude was up US36 cents at US$72.25.

U.S. government data Wednesday may show that crude stocks fell in the United States, the world's top energy consumer, by 1.8 million barrels last week as refineries churned out more fuel and imports dropped, according to an expanded Reuters poll of 13 analysts.

The Reuters/Jefferies CRB Index, which tracks 19 raw materials, rose 0.26%% to 274.22.

Businesswire.co.nz

Comments from our readers

No comments yet