By Agency reporter

Monday, 15 Nov 2010

Investors had few places to hide on Friday as stocks, bonds, and commodities fell on fears China might raise interest rates, while Ireland‘s dubious debt position forced European leaders to leap to Dublin‘s defense.

Reuters reported from New York on Saturday, that the United States stocks snapped a five week winning streak, ending lower as commodity and energy shares took a beating on concerns that changes in Chinese monetary policy might slow the pace of its voracious appetite for raw materials.

The euro was given a reprieve, rising from six-week lows as officials reiterated to bondholders they would not be forced to take losses in the event of a new euro zone bailout.

”The fact that euro zone officials said Irish bond holders don‘t have to take a haircut on their existing positions is supportive for the euro,” the Chief Market Analyst at Commonwealth Foreign Exchange, Mr. Omer Esiner, said.

US Treasuries‘ prices fell sharply after the first day of purchases by the US Federal Reserve as part of its new $600bn bond-buying programme to stimulate the US economy.

The Fed bought $7.23bn in Treasury paper maturing in four to six years on Friday.

”Investors are trying to readjust rates to a better economic outlook and the prospect of no further QE after the current programme of asset purchases,” an economist at Decision Economics in New York, Ms. Cary Leahey, said.

Benchmark 10-year US Treasury losses tripled after the results, falling a 45/32 of a point in price and pushing the yield to a two month high of 2.79 per cent.

Spot gold and crude oil prices suffered their biggest drop in a month, despite the US dollar‘s weakness.

At the close, the Dow Jones industrial average .DJI fell 90.52 points, or 0.80 per cent, at 11,192.58. The Standard & Poor‘s 500 Index .SPX lost 14.33 points, or 1.18 per cent, at 1,199.21. The Nasdaq Composite Index .IXIC dropped 37.31 points, or 1.46 per cent, at 2,518.21.

For the week, the Dow industrials and S&P 500 lost 2.1 per cent while the Nasdaq lost 2.35 per cent.

The pan-European  FTS Euro first 300. FTEU3 index of top shares closed down 0.43 per cent at 1,103.99 points.

Shanghai‘s stock market suffered the worst loss in over 14 months after rumors swept through the market that further monetary tightening was imminent to stem rising Chinese prices, especially in the housing sector.

”The whole commodity complex is exceptionally weak after the overnight action in China, and we need to see how it all plays out,” the Managing Partner at Palantir Capital Management, Houston, Mr. Tom Samuels, said. ”This may be the first seed of doubt about the healing power of (quantitative easing).”

Tokyo’s Nikkei 225 index N225 fell by 1.4 per cent from four and a half months closing high in the previous session.

Source: Punch