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Global Market Wrap-Up - Global Market Wrap-Up

Wednesday, February 3, 2010
By: 
Mark Hanna

A weaker than expected ISM Services number caused weakness in most US markets; this reinforces a recent pattern where ISM Manufacturing has shown relative strength whereas Services, which make up a much larger part of the US economy has lagged.  Despite trillions of money poured into the economy via federal government & Federal Reserve.  While today's number was over 50 (signaling expansion) it was barely so.

  • The Institute for Supply Management said its index of service activity rose to 50.5 in January from a revised 49.8 in December. The January reading was below the level of 51 analysts polled by Thomson Reuters had been expecting.

The S&P 500 fell 0.6% while the NASDAQ was able to snare a small gain of 0.1%.  All eyes will remain on Friday's labor reports in the US.

Sovereign debt issues in Europe continue to cause consternation; this time it was Portugal, joining Greece, at the forefront.

  • Portuguese bonds slid, pushing the yield on the 10-year note up by the most in 11 months, as the country’s borrowing costs soared at a sale of bills on concern the government will fail to curb its budget deficit.
  • The decline sent the yield on the security to the highest since March, increasing the premium investors demand to hold the debt instead of benchmark German bunds to 147 basis points, a 10-month high.
  • Portuguese central bank Governor Vitor Constancio said yesterday that cutting the budget deficit will require “difficult” measures and that the economy is unlikely to catch up with its European peers any time soon.   Portugal’s public debt will rise to 91 percent of gross domestic product by 2011 from 77 percent last year.

This caused the dollar to strengthen, which of course led to weakness in many risk assets, including commodities - as has been the inverse relationship for the better part of 2+ years. Crude oil dropped 73 cents to fall just under $77, gold fell $5.60 while silver gave back roughly 1% to finish at $16.58.

European indexes were weak with losses in Britain (-0.6%), Germany (-0.7%) and France (-0.5%).

Asian stocks rebounded to post across the board gains with excess strength in China (+2.4%), India (+2.1%), and Hong Kong (+2.2%).  Japan had a modest gain of 0.3%.

 

Aside from being a daily contributor to Euro Pacific Capital, Mark also maintains the website Fund My Mutual Fund.

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