World shares dip as clouds gather over Europe

Posted June 14, 2012 09:48:36

Weaker than expected economic data from the United States and a continued rise in funding costs for European countries pushed global stocks mostly lower overnight.

After the close of trade in the US, Moody's downgraded its credit rating for Spain to Baa3, just one notch above junk, and placed the country on review for a further downgrade that could put it below investment grade.

The Dow Jones Industrial Average erased half of yesterday's gains closing down 0.6 per cent to 12,496, while the S&P 500 lost 0.7 per cent to 1,315 and the Nasdaq Composite Index retreated by 0.9 per cent to 2,819.

Wall Street opened lower after government data revealed US retail sales declined by 0.2 per cent in May.

Stocks picked up midway through trade after investment bank JP Morgan Chase's chief executive Jamie Dimon told the US Senate that his bank remained strong despite the loss of around $2 billion on a failed hedging strategy.

He apologised for the losses, saying they occurred because traders were poorly managed and did not understand what they were doing.

But the rally faded in the final hours of trading after a US official was reported as saying the Group of 20 nations probably would not reach significant progress on Europe's debt crisis at its meeting next week.

Also adding to concerns was another rise in borrowing costs for European nations.

Italy's 10-year bond rates rose another 5 basis points, while Germany's interest on 10-year bonds rose 6 basis points to 1.49 per cent, adding to yesterday's 12-point increase.

In London the FTSE 100 put on 0.2 per cent but the CAC 40 in France gave up 0.6 per cent and the German DAX was relatively unchanged, dipping 0.1 per cent.

Spain's IBEX 35 index added 1.4 per cent.

The Australian dollar was lower against the greenback, despite the US currency also losing steam.

At 9:40am (AEST) it was worth 99.5 US cents, 79.1 euro cents, 79 Japanese yen, 64.1 British pence and more than $NZ1.28.

On commodity markets, West Texas Crude was steady at $US82.55 a barrel and Tapis crude oil was worth $US102.55 a barrel.

The spot gold price was edging higher to $US1,617 an ounce.

Topics: business-economics-and-finance, markets, currency, stockmarket, european-union, united-states