Wall Street Shrugs Off Bad December Housing Data
European stock markets extended losses Monday as a Wall Street rally ground to a halt following particularly bad U.S. housing data and ongoing concerns about President Barack Obama’s plan to curb banks’ risk-taking.
In Europe, the FTSE 100 index of leading 100 shares closed down 42.68 points, or 0.8 percent, at 5,260.31 while Germany’s DAX fell 63.95 points, or 1.1 percent, to 5,631.37. The CAC-40 in France ended 38.93 points, or 1 percent, lower at 3,781.85.
On Wall Street, the Dow Jones industrial average was up 10.20 points, or 0.1 percent, at 10,183.18 around midday New York time while the broader Standard & Poor’s 500 index rose 2.62 points, or 0.2 percent, at 1,094.38.
One market that actually advanced Monday was Greece’s composite index which ended 2.8 percent higher amid market talk that the Greek goverment had managed to raise around €8 billion via a bond issue. Greece’s debt crisis has been undermining the euro and raising fears other EU countries will need to bail Athens out.
Greek stocks were boosted by reports that Greece’s government received around €25 billion of bids after offering a generous price and attractive yield to investors.
“It seems to have been pretty sucessful and eases default concerns that investors had now that Greece can raise funds,” said Orlando Green, an interest rates strategist at Calyon Credit Agricole.
U.S. stocks had been trading higher and the losses in Europe had been less acute before the National Association of Realtors reported that the sale of previously occupied U.S. homes fell in December by more than at any time in 40 years.
December’s sales fell 16.7 percent to a seasonally adjusted annual rate of 5.45 million. Analysts had been expecting a 10 percent fall after lawmakers as many buyers had rushed through to beat the end-November deadline for a tax credit, which has since been extended to April.
The figures reinforced concerns that the recovery U.S. housing market, which was the catalyst to the global recession, may be faltering already.
“It has served as a reminder, if one was needed, that economic recovery is not going to be without at least the odd bump along the way,” said Tim Hughes, head of sales trading at IG Index.
The rally on Wall Street follows a three-day retreat — U.S. stocks on Friday closed out their worst week since early March 2009 — after Obama announced his intention to limit the size of U.S. banks and impose restrictions on their more risky trading activities.
His proposals could one day mean the break-up of some of the U.S. banks but the details need to be ironed out between the White House and lawmakers in Congress — at a time when the economic recovery is far from assured and Obama’s Democrats face a rejuvenated Republican Party in midterm elections later in the year.
There’s now growing talk in the markets that the President’s plan may have brought an end to the ten-month bull run in equities, which has seen most of the world’s main indexes recover all their losses since the collapse of Lehman Brothers in September 2008.
A mixed start to the fourth-quarter U.S. corporate earnings season and apparently rising opposition to U.S. Federal Reserve Chairman Ben Bernanke’s reappointment are also weighing on sentiment.
“Equity investors remain extremely nervous and the market needs solid corporate earnings and some better economic news to get any lasting stability,” said Kit Juckes, chief economist at ECU Group.
A raft of economic news later this week is likely to keep investors on edge. While Bernanke awaits a Senate vote, he will be sitting down with his colleagues on the Federal Open Market Committee on Tuesday and Wednesday to assess the latest batch of information on the U.S. economy.
Though the Fed is expected to keep its benchmark interest rate unchanged, investors will be particularly interested to see the accompanying statement, especially if there’s continued support for keeping borrowing costs “exceptionally low and for an extended period.”
It’s also a busy week in Europe — Tuesday could be particularly important with figures set to confirm that Britain finally emerged from recession in the fourth quarter of 2009. The monthly business confidence survey from the well-respected Ifo Institute will also be closely monitored given a mixed batch of European economic data recently.
The inconsistency of recent data was underlined by EU figures showing Monday that industrial orders in the 16 countries that use the euro rebounded by a sharper than expected 2.7 percent in November from the previous month.
Analysts said interest rate decisions from the central banks of India, Japan, Brazil, Hungary and New Zealand could also impact on market sentiment, while fears of contagion from Greece’s debt troubles are unlikely to go away quickly.
In Asia, investors already on edge about China’s economy and moves to prevent its overheating were further unnerved after Bank of China said it would seek to raise billions of dollars by issuing new equity and bonds. The move, designed to help the country’s third-biggest lender to replenish its capital and meet government standards, added to concerns about banks after a flood of lending to prop up the economy.
Japan’s Nikkei 225 stock average fell 77.86 points, or 0.7 percent, to 10,512.69, and Hong Kong’s Hang Seng fell 127.63 points, or 0.6 percent, to 20,598.55. Elsewhere, South Korea’s market dropped 14.15 points, or 0.8 percent, to 1,670.20. China’s Shanghai index lost 1.1 percent, Australia’s market was down 0.7 percent.
Oil prices lingered below $75 a barrel, with benchmark crude for March delivery up 9 cents to $74.63 a barrel. The contract lost $1.54 to settle at $74.54 on Friday.
The dollar was down 0.2 percent at 90.10 yen while the euro fell 0.1 percent to $1.4139.
____
AP Business Writer Jeremiah Marquez in Hong Kong contributed to this report.