A Mixed Day On Data And Europe; Italian Political Turmoil Weighs

Wed pic

[Chart courtesy of MarketWatch.com]

The major indexes recovered from an early drop to finish mixed amid concerns Europe’s debt crisis is worsening and as pending home sales in the US tripped in February.

Equities headed to their session lows shortly after the open when a report from the National Association of Realtors showed pending home sales declined 0.4 percent in February following a revised 3.8 percent hike the prior month. The trade group cited limited supply of homes in certain parts of the country for the recent weakness.

Stocks however, recovered the bulk of their losses soon after, with the NAR data having little impact on equities.

Separately, the Institute of International finance said banks in Spain, Italy and Portugal may come under funding pressure following a controversial deal in Cyprus that saw imposition of levy on private bank deposits for a 10-billion euro bailout package.

In Italy, hopes for a political coalition faded after Italian Democratic Party Leader Pier Luigi Bersani failed to get support from anti-establishment Five-Star Movement leader Beppe Grillo that would allow his center-left alliance to form a minority government. Bersani said an insane person would want to govern Italy as it is in a mess and faces a difficult year ahead.

The government in Cyprus implemented strict capital controls as it readied for Thursday’s planned reopening of its banks, which have been closed for nearly two weeks as the island nation struggled to negotiate a bailout deal with European lenders in order to avoid a default.

The Dow Jones Industrial Average (DJIA) slipped 34 points while the S&P 500 Index (SPX) fell 1 point, trimming an earlier decline of as much as 0.8 percent.

Treasuries advanced Wednesday as political uncertainty and rising borrowing costs in Italy spurred demand for safe haven assets.

Italy’s auction of 5-year bonds was relatively poor with yield rising to 3.65 percent, the highest since October, as the country’s inconclusive elections in February and the subsequent political wrangling appeared to dent demand.

The US dollar advanced against majority of its 16 most traded peers as investors sought refuge in safer assets amid rising political uncertainty in Europe.

European exchanges edged lower with banks leading the slide, as the latest attempt to form a coalition government failed to take off in Italy. The Stoxx Europe 600 index sank 0.5 percent at the close of trading in London, despite opening in positive territory.

The FTSE MIB index tumbled 0.9 percent in Rome after Italy’s Democratic Party leader Pier Luigi Bersani ruled out forming a grand coalition with Silvio Berlusconi’s center-right alliance. Unicredit SpA crashed 6.3 percent while Banca Popolare di Milano Scarl tripped 3.4 percent.

National benchmark indexes fell in all 18 western-European markets.

Trend wise, we did not see much of a move from yesterday, as the indexes recovered close to the unchanged line. The Domestic Trend Tracking Index (TTI) headed slightly higher to +3.88% while the International TT retreated to +7.89%.

This entry was posted in Market Commentary and tagged , , , , , . Bookmark the permalink.

Comments are closed.