Get 40% Off
👀 👁 🧿 All eyes on Biogen, up +4,56% after posting earnings. Our AI picked it in March 2024.
Which stocks will surge next?
Unlock AI-picked Stocks

GLOBAL MARKETS-Bank worry hits stocks, bonds gain ground

Published 12/08/2009, 08:31 AM
Updated 12/08/2009, 08:33 AM

* Stocks fall, bank shares hit by Dubai concerns

* Bernanke cools U.S. rate rise speculation, yields ease

* Investors seek out government bonds

* Fitch cuts Greece's sovereign rating to BBB+

By Ian Chua

LONDON, Dec 8 (Reuters) - Global share markets fell on Tuesday with bank stocks hit by fears of exposure to Dubai debt while the euro slid after a ratings agency downgraded Greece's credit rating.

Investors took refuge in some of the safer government bonds including U.S. Treasuries and the euro zone's benchmark German Bunds, helping drive bond yields lower.

Wall Street looked set to fall as well with U.S. stock index futures down between 0.8 and 0.9 percent.

Financial shares were among the hardest hit on concerns about the sector's exposure to some of Dubai's debt-laden firms.

Moody's cut the ratings of six Dubai-linked issuers after concluding that no "meaningful" government support would be provided for top firms like DP World.

"There's a bit of flight to quality coming in. We had some pessimistic headlines from Dubai and to round it off we had news of Greece's credit downgrade," said Kenneth Broux, market economist at Lloyds TSB.

Fitch cut Greece's sovereign rating to BBB+ from A-, citing fiscal deterioration in the euro zone's weakest member.

MSCI world equity index shed 0.5 percent while the FTSEurofirst 300 index of top European shares dropped 1.5 percent to one-week lows.

MSCI emerging market stock index slid 0.7 percent. Dubai's share index was among the biggest losers, falling 6.1 percent to a 21-week closing low.

3rd party Ad. Not an offer or recommendation by Investing.com. See disclosure here or remove ads .

GREEK TROUBLES HIT EURO

Fitch's downgrade of Greece knocked the euro versus the dollar.

By 1256 GMT, the euro was down 0.2 percent at $1.4788, while the dollar index gained 0.1 percent to 75.859.

The dollar had come under pressure after Federal Reserve Chairman Ben Bernanke dampened speculation on Monday of an early U.S. interest rate rise.

He said the economic recovery still faced "formidable headwinds" and the central bank was sticking to its pledge to hold benchmark rates at exceptionally low levels for an "extended period".

His comments took the shine off last Friday's non-farm payrolls report which showed a surprise fall in the U.S. jobless rate and triggered a drop in the yield of the interest rate sensitive two-year Treasury note.

The two-year note yield was last at 0.71 percent, well off Monday's high of around 0.87 percent.

"Bernanke has been the principal driver of the dollar. It is all down to U.S. interest rate expectations," said Adam Cole, global head of FX strategy at RBC Capital Markets.

Cole said the yen was the main gainer because Friday's jobs data had sparked talk that the yen would return to being the funding currency of choice.

The dollar fell 1.1 percent versus the yen to 88.52 yen and was little changed against a basket of major currencies. The euro was 1.3 percent lower versus the yen at 130.91 yen.

Further helping shore up German Bunds was caution over some of the region's weakest sovereigns including Greece. The two-year Schatz yield fell 10.4 basis points to 1.232 percent.

3rd party Ad. Not an offer or recommendation by Investing.com. See disclosure here or remove ads .

Investors are becoming more cautious as the year-end draws near and the price of risk is rising, according to the VIX fear factor index, which rose 4 percent on Monday.

Oil prices fell 1.1 percent to $73.15, still shaky after a 2 percent slide on Monday and pressured by a slow recovery in energy demand and ample supplies.

Gold eased slightly to $1.153.45 an ounce after a rebound to $1,168 lost steam. (Additional reporting by Jessica Mortimer in LONDON and Susan Fenton in HONG KONG, editing by Mike Peacock)

Latest comments

Risk Disclosure: Trading in financial instruments and/or cryptocurrencies involves high risks including the risk of losing some, or all, of your investment amount, and may not be suitable for all investors. Prices of cryptocurrencies are extremely volatile and may be affected by external factors such as financial, regulatory or political events. Trading on margin increases the financial risks.
Before deciding to trade in financial instrument or cryptocurrencies you should be fully informed of the risks and costs associated with trading the financial markets, carefully consider your investment objectives, level of experience, and risk appetite, and seek professional advice where needed.
Fusion Media would like to remind you that the data contained in this website is not necessarily real-time nor accurate. The data and prices on the website are not necessarily provided by any market or exchange, but may be provided by market makers, and so prices may not be accurate and may differ from the actual price at any given market, meaning prices are indicative and not appropriate for trading purposes. Fusion Media and any provider of the data contained in this website will not accept liability for any loss or damage as a result of your trading, or your reliance on the information contained within this website.
It is prohibited to use, store, reproduce, display, modify, transmit or distribute the data contained in this website without the explicit prior written permission of Fusion Media and/or the data provider. All intellectual property rights are reserved by the providers and/or the exchange providing the data contained in this website.
Fusion Media may be compensated by the advertisers that appear on the website, based on your interaction with the advertisements or advertisers.
© 2007-2024 - Fusion Media Limited. All Rights Reserved.