'Stock markets looking very short term, very nervous'
Going south: A pedestrian passes by a share prices board, which shows all downward indexes in Tokyo. Picture: AFP
Saturday, February 23, 2008
WORRIES that the world's biggest economy may be deteriorating more rapidly than expected sent stocks from Sydney to London lower yesterday, and kept the US dollar pinned at two-week lows versus a basket of currencies.
US data on Thursday showed US mid-Atlantic factory production slumped to its lowest level since the 2001 recession, and an index of future US economic activity pointed to even tougher times ahead.
But safe-haven European government bonds, which rose earlier on those US worries, suffered a setback after a report showed eurozone services growth unexpectedly bounced back in February from a 4-1/2 year low.
Still, investors were increasingly wary of taking risk with European credit spreads widening. The iTraxx Crossover index, made up of 50 mostly "junk"-rated credits, was 12 basis points wider at 589 points.
"This is going to be a Darwin market, survival of the fittest and strongest," said Justin Urquhart, strategist at 7 Investment Management.
"The market is looking very short term. It's very nervous, it can't find any longer-term reason to push the value up."
The FTSEurofirst 300 index of top European shares fell 0.4 per cent, with London's FTSE down 0.5 per cent and Germany's DAX 0.8 per cent lower.
Energy stocks such as Royal Dutch Shell were among the losers after worries that weaker US growth would slow demand kept crude oil well off a recent all-time high above US$101 a barrel. US crude fell 40 cents to US$97.77.
Earlier, Japan's Nikkei lost 1.4 per cent, while MSCI's measure of other Asian stock markets slid 0.7 per cent. MSCI's main world equity index was 0.2-per cent lower.
In the currency market, the US dollar touched a fresh two-week low versus the euro and slipped against the yen, which tends to benefit as investors pare risky carry trades that involve borrowing the low-yielding currency.
The euro traded at US$1.4835, after peaking at US$1.4847 earlier, while the US dollar eased to ¥107.22, well off the high above ¥108 in the previous session.
"It is a weak dollar story more than anything else. As you saw yesterday the Philly Fed was really what hurt the dollar," said Niels Christensen, FX strategist at Nordea in Copenhagen.
In contrast, "there is no sign of an early rate cut from the ECB".
The ECB has held its benchmark rate at 4 per cent since last June while the Fed has slashed its key rate to 3 per cent.
Reuters
US data on Thursday showed US mid-Atlantic factory production slumped to its lowest level since the 2001 recession, and an index of future US economic activity pointed to even tougher times ahead.
But safe-haven European government bonds, which rose earlier on those US worries, suffered a setback after a report showed eurozone services growth unexpectedly bounced back in February from a 4-1/2 year low.
Still, investors were increasingly wary of taking risk with European credit spreads widening. The iTraxx Crossover index, made up of 50 mostly "junk"-rated credits, was 12 basis points wider at 589 points.
"This is going to be a Darwin market, survival of the fittest and strongest," said Justin Urquhart, strategist at 7 Investment Management.
"The market is looking very short term. It's very nervous, it can't find any longer-term reason to push the value up."
The FTSEurofirst 300 index of top European shares fell 0.4 per cent, with London's FTSE down 0.5 per cent and Germany's DAX 0.8 per cent lower.
Energy stocks such as Royal Dutch Shell were among the losers after worries that weaker US growth would slow demand kept crude oil well off a recent all-time high above US$101 a barrel. US crude fell 40 cents to US$97.77.
Earlier, Japan's Nikkei lost 1.4 per cent, while MSCI's measure of other Asian stock markets slid 0.7 per cent. MSCI's main world equity index was 0.2-per cent lower.
In the currency market, the US dollar touched a fresh two-week low versus the euro and slipped against the yen, which tends to benefit as investors pare risky carry trades that involve borrowing the low-yielding currency.
The euro traded at US$1.4835, after peaking at US$1.4847 earlier, while the US dollar eased to ¥107.22, well off the high above ¥108 in the previous session.
"It is a weak dollar story more than anything else. As you saw yesterday the Philly Fed was really what hurt the dollar," said Niels Christensen, FX strategist at Nordea in Copenhagen.
In contrast, "there is no sign of an early rate cut from the ECB".
The ECB has held its benchmark rate at 4 per cent since last June while the Fed has slashed its key rate to 3 per cent.
Reuters
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