U.S. Markets Try to Brush Off European Bank Worries | The Mesh Report

U.S. Markets Try to Brush Off European Bank Worries

the Mesh Report Staff September 8, 2010 0


Indexes on Wall Street were higher Wednesday as investors tried to brush off fresh worries about the health of European banks.

Strong demand at an auction for Portugal’s debt early Wednesday helped relieve some concerns that resurfaced this week about the health of Europe’s banking industry. European markets turned positive after the results of the auction were announced.

Major Wall Street indexes retreated Tuesday after new questions surfaced about how much potentially risky government debt European banks are holding. That snapped a strong four-day rally in the United States where investor optimism grew after reports on employment and manufacturing showed the economy continues to grow, although slowly.

A report on Wednesday afternoon from the Federal Reserve could provide further insight into the pace of the recovery in the United States. The Fed’s beige book will break down economic activity across the country by region.

The Fed has been cautious in its statements about the economy. Any signs of encouragement from the central bank could be considered further confirmation of last week’s economic reports and restart the rally.

In early trading, the Dow Jones industrial average rose 63.84 points, or 0.6 percent. The Standard & Poor’s 500-stock index rose 7.03, or 0.6 percent, while Nasdaq gained 15.08, or 0.7 percent.

Treasury prices fell as investors moved back into riskier stocks. The yield on the 10-year Treasury note, which moves opposite its price, rose to 2.65 percent from 2.59 percent late Tuesday. Its yield is often used to help set interest rates on mortgages and other consumer loans.

Shares in Europe were also higher. In afternoon trading, the FTSE 100 in London was 0.43 percent higher while the CAC 40 in Paris was 0.92 percent higher. In Frankfurt, the DAX was up 0.83 percent.

Financial stocks were among the hardest hit in Europe, with Deutsche Bank down 1.3 percent, Barclays 3.5 percent and Société Générale, 3 percent.

Amid worries that some banks’ exposure to bad government debt could be larger than previously estimated, borrowing costs for some countries rose.

The euro hovered around $1.2685, about the same as in New York trading late Tuesday.

Asian indexes closed sharply lower, with market sentiment dominated by the spike in the yen’s value and the toll it takes on exporters. Japan’s benchmark Nikkei 225 stock index dived 2.2 percent to 9,024.60.

The dollar edged up to 83.77 yen from 83.74 yen the day before after falling as low as 83.32 earlier.

China’s benchmark Shanghai Composite Index shed 0.1 percent to 2,695.29 amid fears of new property curbs and Hong Kong’s Hang Seng index lost 1.5 percent to 21,088.86.

Investors worried that Beijing might impose new curbs to cool the housing market ahead of the peak sales season of September and October, analysts said. That may include halting mortgage discounts and loans to developers.

“Heavyweights, including banks and real estate stocks, remained sluggish, because it is unclear where the government policies are heading,” said Li Jun, an analyst for Central China Securities in Shanghai.

Elsewhere, South Korea’s Kospi declined 0.5 percent to 1,779.22. India’s Sensex was down 0.2 percent at 18,598.63 and Australia’s S&P/ASX 200 fell 0.8 percent to 4,537.20. Shares in Taiwan, Malaysia and Singapore all retreated.

Leave A Response »

You must be logged in to post a comment.