By Agency reporter

Monday, 20 Dec 2010

The euro fell against the dollar for a second straight week and global stocks edged lower on Friday, weighed by renewed concerns over euro zone debt after a multi-notch downgrade of Ireland‘s credit rating.

Investors, according to Reuters, shifted into safe-haven bonds and sold the euro after Moody‘s slashed Ireland‘s rating by five notches, warning that further downgrades could follow.

United States Treasury securities rallied, causing yields to decline, as the market got a boost from the Federal Reserve on Friday with its latest purchase of long-dated bonds.

Moody’s move on Ireland followed Fitch‘s three-notch downgrade last week. Earlier this week, Moody‘s placed Spain and Greece on a review for possible downgrades.

“While the Moody‘s downgrade of Ireland is not any surprise, the sheer magnitude of five notches warrants a mention. We haven‘t seen anything like this since the Asian crisis,” Senior Currency Strategist at Brown Brothers Harriman in New York, Win Thin, said.

“We foresee ongoing downgrades for peripheral, and perhaps even some core, euro zone countries over the course of 2011 as the debt ratios are going to get much worse before they get better,” Thin added.

World markets gained little comfort from a European Union summit, at which leaders agreed to create a permanent financial safety net from 2013 but provided no new measures to deal with the immediate crisis.

”Everyone should be troubled with the situation in Europe, and we don‘t think this the last of the news,” said Matt King, chief investment officer at Bell Investment Advisors in Oakland, California, which oversees $400m in assets.

European banks were under severe selling pressure over Ireland‘s debt situation. At the close in New York, US-listed shares of Allied Irish Bank were down 4.6 per cent to $1.22 while Barclays dropped 2.1 per cent to $16.24.

US stock markets closed near multi-year highs on Friday, as the S&P edged higher, but more meaningful gains may be hard to come by in the next two weeks, which are traditionally quiet.

US benchmark indexes closed mixed. The Dow Jones industrial average fell 7.34 points, or 0.06 per cent, to 11,491.91, while the Standard & Poor‘s 500 Index rose 1.04 points, or 0.08 per cent, to 1,243.91. Gains in the technology sector lifted the Nasdaq Composite Index 5.66 points, or 0.21 per cent, to 2,642.97.

The FTSEurofirst 300 index of top European shares closed down 0.44 pe rcent at 1126.28, dragged by banks , which dropped 1.49 per cent. As one example, shares of Royal Bank of Scotland dipped 5.73 per cent.

The MSCI‘s all-country world stock index .MIWD00000PUS slipped 0.02 per cent, while the Thomson Reuters global stock index fell 0.15 percent.

The euro sank against the dollar, hitting a two-week low after a drop below $1.32 triggered automatic sell orders.

After a blip of positive news from better-than-expected data on German business morale, the euro slid as low as $1.3133 on trading platform EBS, and was last down 0.43 per cent at $1.3179. A break below $1.3104, its 200-day moving average that is deemed a near-term support level, could lead to a further decline, traders said.

Bolstered by the weak euro, the dollar rose against a basket of major currencies by 0.26 per cent at 80.392. Against the Japanese yen, however, the dollar softened 0.1 per cent to 83.96.

With the dollar on stronger ground, gold and oil prices slipped. At US market close, crude oil 38 cents, or 0.43 per cent, to $88.08 per barrel, while spot gold prices climbed $6.15, or 0.45 per cent, to $1375.40.

As investors sought security in the tumultuous market, US Treasury securities rallied. The benchmark 10-year US Treasury note was up 25/32 points in price, yielding 3.3356 per cent. The 30-year note jumped 53/32 to yield 4.4376 per cent.

 

Source: Punch