December 6, 2023

Stock Markets Recover Some Losses

Stock markets were modestly higher Thursday, just about recovering Wednesday’s losses, although many traders were still shying away from riskier assets at year-end.

In Italy, the government successfully tapped bond investors for more cash for the second day running.

But in a sign that nerves remained high, the euro was near a one-year low against the dollar and sank to a decade-low against the Japanese yen. In relatively thin trading, which often accentuates movements, the euro fell to $1.2883, its lowest level since Jan. 10 and not far from its 2011 low of $1.2860. Against the yen, it fell to 100.33 yen, a 10-year low.

In New York, the Standard Poor’s 500-stock index and the Dow Jones industrial average both closed up 1.1 percent. The Nasdaq composite index was 0.9 percent higher.

On Wednesday, the S.P. 500 fell 1.3 percent, while the Dow lost 1.1 percent.

Another bond auction from Italy’s monetary authorities did little to shore up stocks or the euro, even though borrowing rates fell for the second consecutive day. In total, Italy raised around 7 billion euros ($9.2 billion) in the four auctions.

In the most awaited auction, the Bank of Italy reported that Italy raised 2.5 billion euros ($3.3 billion) of 10-year bonds at an average yield of 6.98 percent. That is lower than the 7.56 percent it had to pay at an equivalent auction last month, when investor concerns over the ability of the country to service its huge debts became particularly acute and effectively prompted a change in government.

However, the country’s borrowing rate on the critical 10-year bond remained uncomfortably close to the 7 percent level widely considered to be unsustainable in the long run. Greece, Ireland and Portugal all had to request financial bailouts after their 10-year bond yields pushed above 7 percent.

In another sign of unease, banks continued to park large amounts of money overnight at the European Central Bank, reflecting strains in the interbank lending market and the central bank’s big 489 billion euro infusion of cheap, long-term credit into the banking system last week. The amount deposited overnight Wednesday was an elevated 436.58 billion euros, down from a record 452.03 billion euros from Tuesday.

The large deposits suggest banks are temporarily holding some of their borrowings from last week there. It also suggests that banks are afraid to lend to each other on the interbank market, preferring to hold cash risk-free at the central bank even at low interest rates.

In Europe, the FTSE 100 index of leading British shares closed up 1.1 percent, while the CAC 40 in France rose 1.8 percent. Germany’s DAX was 1.3 percent higher, though it had borne the brunt of the selling in the previous session.

Earlier in Asia, investors booked losses amid light trading. Japan’s Nikkei 225 index fell 0.3 percent to close at 8,398.89. Hong Kong’s Hang Seng Index closed 0.7 percent lower at 18,397.92.

Oil markets were subdued with the benchmark New York rate up 27 cents at $99.63 a barrel.

Article source:

Speak Your Mind