Global Trading Wrap: Equity Markets Retreat On GM Bankruptcy Concerns

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Wall Street: U.S. equity markets closed lower on Wednesday as rising bond yields led to speculation that borrowing costs will rise hurting the economic recovery. The market also dropped as General Motors seem set to file chapter 11 bankruptcy ahead of the June 1 deadline. Bank stocks moved lower led by Bank of America and Citigroup. However, Research in Motion rose for a second day after analyst upgrades. The DOW lost 173.47 points to close on 8300.02. The S&P lost 17.27 points to close on 893.06 and NASDAQ lost 19.35 points and closed on 1731.08.

Europe:  European equities gained for a third straight day on Wednesday, again on hopes the global economy and equity markets have brighter outlooks. The gains in equities were led by financial and retail stocks. HSBC gained 2% while Societe Generale added 1.8%. European markets were also boosted by data showing that existing U.S. home sales rose 2.9% in April fueling speculation that the housing recession is close to bottom. Retail stocks Morrison, Tesco and Carrefour led the retail shares higher. The DAX gained 15 points; the CAC 40 gained 25 points while the FTSE added 4.5 points.

Asia: Asian equity markets moved much higher overnight after a better than expected read on U.S. consumer confidence led to further optimism that the downturn in the global economy has hit or is close to hitting a bottom.  The Japanese Nikkei closed at its highest level in almost 2 weeks, led by exporters such as Sanyo which gained 7%. The Asian markets would have moved even higher but fears about a possible GM bankruptcy capped gains. The Nikkei gained 128 points while the Hang Seng gained an impressive 894 points (5.26%)

Financial Sector: In trade on Wednesday the XLF, the financial sector ETF, fell 0.15 points (1.25%) to trade at 11.89. It moved lower on slightly lighter volume; 97.14m ETF's changed hands, below the ten day average of 176.1m. Equity markets closed much lower on Wednesday, after Tuesday’s optimism subsided and GM dragged the market lower on possible bankruptcy fears.
 
Treasuries:  Treasuries fell for a fourth straight day on concerns that debt sales will be more than the demand as the economy continues to show signs of stabilizing. Even though today’s record tying auction of $35 billion in five tear notes drew strong demand, government debt declined. The yield on the ten year note rose eight basis points to 3.64%. The yield on existing five year notes rose six basis points to 2.37%.
 
Crude oil: Oil prices continued to rise on Wednesday, hitting a six month high, above $63 a barrel after OPEC’s biggest member, Saudi Arabia said the global economy had strengthened to a level to be able to cope with oil prices at $75-$80 a barrel. U.S. housing data released this morning gave strength to the oil market but weaker U.S. equities limited oil’s strength.

Gold Bullion: Gold prices were virtually flat on Wednesday as the dollar traded mixed against the other major currencies. Bullion dropped $1 an ounce to close at $952.30. Traders often move into and out of gold depending on the movement of the dollar.