By Udeme Ekwere

Thursday, 6 Jan 2011

World stocks, crude oil and the euro retreated from early new-year highs on Wednesday, with underlying economic optimism reined in by jitters about lingering debt woes and uncertainty about economic data.

In a pattern investors say may well be repeated throughout 2011, a burst of new year investor optimism in stocks quickly fell prey to profit taking and so-called correlation trading that links moves in one security to the buying or selling of another.

Reuters reported on Wednesday, that a slide in commodity prices continued for a second day, pressuring world equity markets. The fall in commodity prices may have resulted from the rise in the United States dollar and a fall in the Australian dollar after severe floods in that country.

Oil, which had only a few days ago looked to be heading to $100 a barrel again, fell back below $89 a barrel in London. Prices of both commodities and equities, however, remained near multi-year highs.

The biggest increase in US private sector jobs since at least 2001, as reported by ADP Employer Services, supported the New Year optimism, leading bond prices to decline and many stock markets to trim losses.

”You cannot ignore the strength of this report. As a consequence of this report we are taking our payrolls estimate higher for sure,” said Mr. Tom Porcelli, US economist at RBC Capital Markets in New York.

The Dow Jones industrial average was down 27.17 points, or 0.23 per cent, at 11,664.01. The Standard & Poor‘s 500 Index was down 3.56 points, or 0.28 per cent, at 1,266.64. The Nasdaq Composite Index was down 7.08 points, or 0.26 per cent, at 2,674.17.

World stocks as measured by MSCI remained down 0.6 per cent, about the same as before the ADP report and still within a few points of highs last seen in the third quarter of 2008.

Europe‘s FTSEurofirst 300 .FTEU3 pared losses and was down 0.5 per cent. Earlier, Japan‘s Nikkei .N225 closed down nearly 0.2 per cent after hitting a 7-1/2 month closing high on Tuesday.

A number of market moves were put down to investors adjusting positions after end-of-year balancing of portfolios.

 

Source: Punch