Asian markets closed mixed, as the major indexes pared early losses. The Nikkei rose .2% to 8480, the Kospi rallied 1.1%, and the ASX 200 ticked up .3%. China’s markets closed lower, as the Shanghai Composite eased .2%, and the Hang Seng dropped .8%, weighed down by real estate companies.
European markets sank, as rising bond prices reinforced fears of contagion. The CAC40 tumbled 1.8%, the DAX fell 1.1%, and the FTSE slumped 1.6%. Spanish bond prices continued to drop, pushing yields on 10-year Spanish notes up to 6.975% in a government auction, with a weak bid-to cover ratio of 1.54.
The selling continued in the US, with the Dow dropping 135 points to 11771, the Nasdaq falling 2%, and the S&P 500 closing down 1.7% to 1216.
Currencies
The Australian Dollar fell below the 1.000 parity level, closing down .8% to .9997, and the Yen rose .1% to settle below 77 at 76.98. The Canadian Dollar skidded .5% to 1.0289. The Euro closed up fractionally surrendering early gains, and the Pound gained .2% to 1.5754.
Economic Outlook
Thursday’s economic data was mostly positive. Weekly jobless claims dropped to their lowest level in 7-weeks at 388K, better than forecast. Building permits were higher than expected, while housing starts were in line with analyst expectations. On a weaker note, the Philly Fed manufacturing index unexpectedly dropped to 3.6 from 8.7.
Asian and European Equities Drop, US ends Mixed
Equities
Asian markets skidded on Friday, as Europe’s debt troubles remained in focus. The Nikkei fell 1.2% to 8375, the Kospi sank 2%, and the ASX 200 slumped 1.9%. China’s Shanghai Composite dropped 1.9%, and Hong Kong’s Hang Seng, declined 1.7%.
European markets continued to drop. Comments by German’s chancellor Merkel, that the ECB “cannot pretend to have powers they don’t have” cast doubt on plans for the ECB to lend money to the IMF to purchase sovereign bonds. The ECB cannot buy bonds directly. The FTSE fell 1.1%, the CAC40 dropped .4%, and the DAX closed down .9%.
FTSE slumps more than 1%
In the US, the Dow gained 26 points to 11796, while the Nasdaq fell .6% and the S&P 500 closed flat.
Currencies
The Dollar traded modestly lower against the major currencies. The Euro rose .4% to 1.3524, the Pound advanced .3%, and the Australian Dollar ticked up .1% to 1.0010. The Swiss Franc gained .5% to 1.0908.
Economic Outlook
Leading indicators gained by .9% last month, beating analyst forecasts.
Short Term Spanish Bond Yields Soar
Equities
Asian markets ended mixed as investors responded to the latest failure by US lawmakers to address the nation’s deficit troubles. The Nikkei fell .4% to 8315, but was well of its intraday low of 8261. The Korean Kospi rose .3%, erasing early losses, and the ASX 200 sank .7%, weighed down by a 4.3% drop in Qantas Airways. In greater China, the Shanghai Composite closed flat and the Hang Seng inched up .1% to 18252.
European markets extended their losing streak to 4, as a weak debt auction in Spain pressured financials. An government auction of 3-month bonds had a yield of 5.11%, more than double the rate from a month ago. The DAX slumped 1.2%, the CAC40 dropped .8%, and the FTSE fell .3%. European banks fell more than 3%, as the value of their bond holdings continues to erode.
US Markets Continue to Fall
Deere rallied 2.9% after raising its guidance for 2012 and reporting strong earnings. Pandora Media shares tumbled 11.3% after issuing a weaker than expected outlook.
Currencies
The Dollar rallied strongly against the major currencies, as the Euro closed down 1.3% to 1.3335, and the Australian Dollar tumbled 1.6% to .9687. The Pound fell .8% to 1.5515, and the Canadian Dollar lost .9% to 1.0478. The Yen fell .5% to 77.35, and the Swiss Franc dropped .7% to 1.0867.
Economic Outlook
The reality that even Germany is having trouble raising money is a strong warning sign for the markets, although Germany’s bond yields are close to record lows.
Wednesday’s extensive US data was mixed. Consumer Sentiment came in slightly below estimates, and weekly unemployment claims rose to 393K from last weeks 391K reading, worse than forecast. Personal spending rose by just .1%, much less than last month’s .7% jump.
Nikkei Drops to 2 1/2 Year Low
Equities
Asian markets ended mixed following Wednesday’s sharp slide on Wall Street. The Nikkei returned from a holiday, dropping 1.8% to 8165, its lowest close since early 2009. Korea’s Kospi gained .7%, shaking off opening weakness, while the ASX 200 eased .2%. The Hang Seng rose .4% and the Shanghai Composite inched up .1% amid rumors of monetary easing in China.
Nikkei Falls Below March's Quake Low
In Europe, the major indexes closed lower, surrendering early gains. The DAX fell .5%, the FTSE slipped .2%, and the CAC40 ended flat, following remarks by German Chancellor Merkel which reiterated her opposition to changes in the ECB.
Currencies
The currency market experience very narrow trading ranges thanks to the closure of US banks. The Euro, Swiss Franc and Canadian Dollar all ended within a few pips of their opening prices. The Pound slipped .2% to 1.5494, while the Australian Dollar gained .4% to .9726.
Economic Outlook
US markets close early on Friday, and volume is expected to be light.