UK markets closed lower yesterday, with the FTSE 100 index ending its four-day winning streak, as Moody’s downgrades of Greek debt rating and a possible debt default by the US dampened market sentiments.
Banks, Barclays, Royal Bank of Scotland and HSBC, dropped between 0.8% and 4.4%, as risk aversion increased among investors.
Insurers, Aviva, RSA Insurance and Old Mutual, lost between 0.5% and 3.0%, in line with a fall in equity markets.
Among other stocks, Dixons Retail slipped 6.1%, after UBS downgraded the stock to “Sell” from “Neutral”, while Halfords Group declined 3.9%, after JPMorgan Chase cut its recommendation on the stock to “Underweight” from “Neutral”.
Losses for UK stocks were restricted by gains in precious metal miners, drug makers and some oil producers.
European Trading Review
European markets ended mostly lower yesterday, amid concerns that US might default, after talks between President Barack Obama and Congress to raise the debt ceiling failed.
European market sentiment was weighed down on reports that Moody’s Investors Service downgraded Greece’s debt rating by three notches.
Among banking stocks, UniCredit, BNP Paribas and Credit Agricole, declined between 4.3% and 7.1%, amid concerns that the debt contagion might spread to other economies in the Eurozone, while Popolare di Milano slumped 8.3%, after JP Morgan downgraded the stock to ‘Underweight’.
Fiat rose 5.4%, after the company reported a rise in quarterly profit and raised its full-year earnings guidance.
FTSEurofirst 300 index declined 0.4% to 1,104.7. German DAX Xetra 30 rose 0.3% or 18.2 points to 7,344.5. French CAC-40 fell 0.8% or 29.7 points to 3,813.0.
US Trading Review
US markets closed lower yesterday, amid concerns over whether Republican and Democrat legislators would agree on a single plan to raise the federal debt limit and avoid a government default.
Among banking stocks, Citigroup, Bank of America and JPMorgan Chase, dropped between 0.9% and 1.2%, as risk aversion increased among investors.
Cigarette maker, Lorillard, declined 4.5%, after the company reported lower-than expected second-quarter sales.
Grocers, Kroger and Safeway, fell 1.9% and 2.1% respectively, after Goldman Sachs downgraded the sector to ‘Sell’ from ‘Neutral’.
Technology stock, Research in Motion, slid 4.4%, after the company announced 2,000 jobs cuts.
Hospital operator, HCA, tumbled 19.2%, after the company reported a decline in complex surgeries and patient volumes.
Losses for US shares were restricted by gains in utilities.
DJIA edged down 0.7% or 88.4 points to 12,592.8. NASDAQ declined 0.6% or 16.0 points to close at 2,842.8. S&P 500 closed 0.6% lower, at 1,337.4.
Forex Trading Review
At 0400 BST today, the GBP is trading 0.3% higher against the USD at $1.6334, 0.3% lower against the EUR at €1.1288 and 0.1% higher against the JPY at ¥127.66.
The USD is trading 0.7% lower against the EUR at $1.4469, after US President Barack Obama warned that the US debt might do “serious” damage to its economy.
The EUR is trading 0.5% higher against the JPY at ¥113.08, as most Asian equity markets traded higher, increasing the demand for high yielding assets.
The WON is trading higher against the USD, as the South Korean Central Bank stated that economic growth would accelerate.
Yesterday, the USD ended lower against the EUR and JPY, as US lawmakers failed to find consensus on raising the nation’s $14.3 trillion debt ceiling.
The EUR ended lower against the JPY, after Moody’s Investors Service lowered Greece’s local and foreign-currency bond ratings from “Caa1” to “Ca”.
Commodities Trading Review
In Asia, crude oil for September delivery is trading 24 cents higher at $99.44 per barrel.
Yesterday, crude oil for September delivery closed 0.7% or 67 cents lower at $99.20 per barrel, amid worries over future oil demand, as a lack of resolution in the US debt ceiling talks raised concerns over the pace of the economic recovery.
Gold for immediate delivery is trading marginally lower today, at $ 1,613.10 per ounce.
Gold prices for August delivery gained 0.7% or $10.70 to $1,612.20 per ounce yesterday, as US leaders failed to agree on a plan to increase the debt ceiling. Another credit downgrade for Greece also spurred investment in the precious metal as a safe haven asset.
Financial Trading News
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'Crude Oil Falls as US Debt Ceiling Deadlock Inspires Future Demand Concerns' edited by ETX Capital, updated 26-Jul-11
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