Global Market Overview

Last updated: November 27, 2012 10:22 pm

Bourses mixed as fiscal cliff woes linger

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Tuesday 22:00 GMT. Global stocks were mixed as early optimism over attempts to secure Greece’s debt deal and strong data on US durable goods was tempered by lingering concerns about the US fiscal cliff.

The single currency at one point rose to $1.3009, its highest since late October. Bourses in Europe also advanced after European authorities outlined a plan for Greece to buy back its debt at distressed rates, and authorised the country to receive a $44.6bn loan instalment in December.

The euro later reversed gains and closed 0.3 per cent lower to $1.2939.

Some traders suggested the euro’s retreat was more a function of dollar strength after Federal Reserve Bank of Dallas president Richard Fisher reiterated his hawkish position regarding the Fed’s asset purchase programme and as market sentiment soured somewhat as the US session evolved.

Analysts have welcomed the resiliency of the US consumer over recent months – as shown by sturdy Thanksgiving retail sales – but many argued household confidence would be battered if Washington cannot agree a budget deal and the economy is hit by $600bn of tax rises and spending cuts.

“Investors bid the dollar moderately higher on their sneaking suspicion the latest aid deal for Greece wouldn’t be the last,” said Joe Manimbo, senior market analyst at Western Union Business Solutions. “Little sign of progress in Washington on avoiding a fiscal crisis at year end cemented a session of across the board gains for the greenback.”

Still, eurozone debt tensions eased, as illustrated by Spanish 10-year yields at November lows, which fell 9 basis points to 5.53 per cent. Benchmark Bunds lost cachet, their yields rising 1bp to 1.43 per cent. The attitude toward the “periphery” is being helped by some well-received debt auctions by Rome and Madrid.

In equities, the FTSE Eurofirst 300 pared a strong advance to record a gain of just 0.3 per cent. The FTSE Asia Pacific index added 0.5 per cent.

Bourses in Europe and Asia had been supported by Wall Street closing well off its Monday lows. The S&P 500 had dropped through the 1,400 mark but subsequently reclaimed that level.

However, on Tuesday the benchmark struggled again and closed 0.5 per cent lower to 1,400, gaining little traction from a batch of better-than-expected data, which included steady US durable goods orders, a firm Case-Shiller house price index and news that consumer confidence sits at a 4-year high.

Other gauges of risk appetite were more distinctly downbeat, with the mood not being helped by a gloomier assessment of the global economy by the OECD.

As noted, the dollar index, which tends to fall when investors are reticent, rose 0.25 per cent, pushing gold down $4 to $1,744 an ounce.

Similarly, copper fell 0.3 per cent to $3.53 a pound and Brent crude declined 1 per cent to $109.85 a barrel.

Highly rated sovereign debt also attracted buyers, with the US 10-year yield falling 3bp to 1.63 per cent. Demand was also solid at an auction of two-year notes. The Treasury department sold $35bn in the securities at a high yield of 0.27 per cent.

In addition to Tuesday’s auction, the US government will sell $35bn in five-year notes on Wednesday and $29bn in seven-year notes on Thursday.

Hopes for additional easing measures from a new Japanese government in December and the Bank of Japan continue to power a rally in Tokyo stocks. The Nikkei 225 rose 0.4 per cent, taking its gain over the past two weeks to nearly 9 per cent as the weaker yen has boosted exporters.

That move stands in stark contrast to the performance of China. The Shanghai Composite fell 1.3 per cent to 1,991 as worries about the earnings prospects of growth sensitive companies took the index to its lowest close since January 2009. The SCi has flirted with the 2,000 mark several times over recent months, so a decisive breach of that support level may encourage more technically focused traders to expect further declines.

Additional reporting by Jamie Chisholm in London

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