Rally cools in US and Europe while bonds warm
Source: Agencies |
December 2, 2011, Friday
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Print Edition
Print Edition
A GLOBAL stock market rally stalled yesterday after Asian markets closed as euphoria over major central banks' coordinated cut to borrowing costs wore off, although hopes that European leaders will next week deliver a long-term solution to the debt crisis helped push eurozone borrowing rates sharply lower.
Stocks and bonds had jumped on Wednesday when central banks in Europe, the US, Canada and Japan made it cheaper for banks to borrow dollars and China's central bank acted to release money for lending.
Worries about Europe's financial system and the European Central Bank's reluctance to intervene heavily in bond markets have resulted in borrowing rates for European countries rising, boosting fears of a new global credit crunch.
But analysts said the central banks' move may have only a short-term effect. Investors said the real boost to the markets might come only if European leaders announce dramatic action at a summit on the debt crisis next week.
ECB chief Mario Draghi yesterday hinted the bank is prepared to play a bigger role in the resolution of the crisis, but only after the 17 countries of the eurozone tether their economies more tightly.
After huge gains this week, the UK's FTSE 100 index inched up 0.5 percent to 5,531.08 in late afternoon trading. Germany's DAX fell 0.5 percent to 6,060.46 and France's CAC-40 was 0.2 percent lower at 3,148.6.
In the US, the markets were up modestly after Wednesday - the best day in two and a half years.
The Dow Jones industrial average was flat an hour after trading opened, while the Standard & Poor's 500 rose 0.2 percent as investors brushed off a rise in jobless claims. The number of Americans applying for benefits last week rose for the second straight week, indicating the economic recovery remains slow and uneven.
Although the stock rally waned, eurozone bonds yesterday continued to perform strongly on hopes that European leaders will agree to new support for weaker states.
Bond yields in the secondary market - where the bonds are traded freely once they are issued - dropped for most eurozone countries. Italy's key 10-year bond yield fell sharply to 6.7 percent from 7.3 percent the day before.
Bonds received a boost from successful auctions in France and Spain. France's borrowing rates fell in a sale of 10-year and 15-year bonds. Spain enjoyed strong demand for its bonds although it had to pay higher interest rates.
Stocks and bonds had jumped on Wednesday when central banks in Europe, the US, Canada and Japan made it cheaper for banks to borrow dollars and China's central bank acted to release money for lending.
Worries about Europe's financial system and the European Central Bank's reluctance to intervene heavily in bond markets have resulted in borrowing rates for European countries rising, boosting fears of a new global credit crunch.
But analysts said the central banks' move may have only a short-term effect. Investors said the real boost to the markets might come only if European leaders announce dramatic action at a summit on the debt crisis next week.
ECB chief Mario Draghi yesterday hinted the bank is prepared to play a bigger role in the resolution of the crisis, but only after the 17 countries of the eurozone tether their economies more tightly.
After huge gains this week, the UK's FTSE 100 index inched up 0.5 percent to 5,531.08 in late afternoon trading. Germany's DAX fell 0.5 percent to 6,060.46 and France's CAC-40 was 0.2 percent lower at 3,148.6.
In the US, the markets were up modestly after Wednesday - the best day in two and a half years.
The Dow Jones industrial average was flat an hour after trading opened, while the Standard & Poor's 500 rose 0.2 percent as investors brushed off a rise in jobless claims. The number of Americans applying for benefits last week rose for the second straight week, indicating the economic recovery remains slow and uneven.
Although the stock rally waned, eurozone bonds yesterday continued to perform strongly on hopes that European leaders will agree to new support for weaker states.
Bond yields in the secondary market - where the bonds are traded freely once they are issued - dropped for most eurozone countries. Italy's key 10-year bond yield fell sharply to 6.7 percent from 7.3 percent the day before.
Bonds received a boost from successful auctions in France and Spain. France's borrowing rates fell in a sale of 10-year and 15-year bonds. Spain enjoyed strong demand for its bonds although it had to pay higher interest rates.
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