Thursday, July 28, 2011

Investors losing patience with US debt standoff

Global markets continued to send the signal to US senators that the political standoff over the country’s debt ceiling is hurting, while disappointing earnings in Europe added to the gloom.

Stocks on Wall Street were modestly higher in morning trade after a dip in US jobless claims, leaving the Dow Jones Industrial Average up 0.6 per cent at 12,373.92 by midday in New York.

European shares recovered losses in a late trade dash for the flat line, with the FTSE Eurofirst 300 ending 0.1 per cent higher at 1,089.39. By the close in Germany, sharp losses for BASF and Siemens dragged the Xetra Dax index down 0.6 per cent to 7,190.06. Asian stocks, however, fell sharply, reacting to overnight losses in the US.

Meanwhile, yields on Italian bonds pushed higher, with the 10-year note yielding close to 6 per cent after the latest debt auction. Rome sold nearly €8bn in three-, four- and 10-year bonds, and although the total amount raised was at the top end of expectations, yields paid were higher than at previous auctions and the bid-to-cover ratio was on the low side.

The US debt problems, along with the lingering concerns over eurozone markets, have become particularly damaging as it is now the busiest period of earnings season. Investors have found it difficult to look beyond the negatives in corporate results when the overall market mood is this gloom-stricken. (more)