Stocks tread water on Bernanke comments

2011-06-08 17:10

New York - Major stock markets fell on Wednesday and the US dollar hit a one-month low against the yen as investors grew increasingly worried about the implications of a bleak outlook for the global economy.

Crude oil prices rose, reversing earlier losses after Opec talks broke down without reaching an agreement to increase output as Saudi Arabia failed to convince members to lift production.

US Federal Reserve chief Ben Bernanke on Tuesday acknowledged that the US economy had slowed, but offered no hint that the central bank is considering further stimulus to support growth. His comments, combined with recent weak US labour and manufacturing data, stoked fears that a slowdown in the world’s largest economy could dent global growth.

“The question marks regarding the growth dynamics for the global economy are becoming bigger and this is weighing on the markets,” said Tammo Greetfeld, equity strategist at UniCredit.

World stocks as measured by the MSCI world equity index slipped 0.7%. The Thomson Reuters global stock index also lost 0.7%. Emerging market stocks fell 0.8%.

Earlier in the day, South Africa’s benchmark blue chip index fell 1.3% to near a psychologically important level, as investors extended the downtrend that started at the beginning of this month on growing worries about the global economic outlook.

Shares in resource companies such as Anglo Platinum [JSE:AMS], Lonmin [JSE:LON], Impala Platinum Holdings [JSE:IMP] and BHP Billiton [JSE:BIL] were down more than 2% each in a global hit on stocks after Bernanke's comments.

The Dow Jones industrial average was down 0.13% soon after the opening, the Standard & Poor’s 500 Index was down 0.24% and the Nasdaq Composite Index was down 0.56%.

The FTSEurofirst 300 index of top European shares was down 1%, plumbing a two-and-a-half month low and a sixth straight day of losses.

The dollar was last down 0.3% at ¥79.88, after hitting as low as ¥79.67 on Reuters data. Traders said losses picked up speed after a series of automatic sell orders were triggered on the greenback’s drop below ¥80. More “stop-loss” barriers were said to be below ¥79.50.

Data, Greece hit euro

The euro fell 0.4% against the dollar to $1.4626. It also lost 0.7% to ¥116.83.

Weaker-than-expected German data and uncertainty over whether European policymakers will manage to pin down a deal for further financial aid for Greece hampered sentiment.

German exports posted their biggest drop in more than two years in April and industry output fell 0.6%, confounding expectations for an unchanged reading, data showed on Wednesday.

Greece needs substantial fresh aid from the eurozone to avoid the currency bloc’s first state insolvency, a German newspaper reported on Tuesday, citing German Finance Minister Wolfgang Schaeuble.

The cost of insuring Greek and Portuguese debt against default rose, while premium investor demand to hold Greek, Portuguese and Irish government bonds rather than benchmark German Bunds rose.

German government Bunds rose around 13 ticks, though outperformance in US Treasuries overnight saw the yield on 10-year US paper fall to 9 basis points below that of Bunds.

US benchmark Treasury yields fell back below the key 3% level as worries over the tepid pace of economic growth spurred investors to buy into lower-risk assets.

Yields on 10-year notes were last at 2.98%, down from 3.00% late on Tuesday.