The inadequate efforts by European policymakers to stem the debt crisis that threatens to tear apart the euro zone is once again in the spot light as investors focussed on the disappointing outcome from the meeting of European Union finance ministers in Cyprus on September 14 and 15. Participants failed to reach consensus on the all important issues of reforms to make the banking system more unified, the conditions to be attached to bailout requests and the role that the European Central Bank should play.
Spanish 10 year bond yields rose to above 6% even as the nation successfully sold EUR 4.6 billion of bills at its latest debt auction. The EURO opens this morning lower at 1.3040.
It wasn't all bad news from Europe. German investor confidence rose for the first time in five months according to the ZEW Center for European Economic Research as investors reacted to the ECB bond buying programme. Meanwhile, the widening rift between Japan and China over disputed islands saw American depositary receipts of Chinese stocks slump for a second day as concerns grow that the drama will impact negatively on the Chinese economy which is already growing at the slowest rate in three years. Japanese retailers have closed their operations in China as demonstrations spread across the country. The serious diplomatic rift and the controversy surrounding the high profile case of ousted Politburo member Bo Xilai threaten to destabilise the once in a decade transition of power that is due to occur later in the year. The Australian dollar has held at 1.0450.
The world's most highly valued company, Apple continues its spectacular rise after it announced that it had sold over 2 million iPhone 5s in the first day of orders, twice as much as the record set by its previous model. FedEx shares plunged more than 2.5% after it cut its profit outlook as consumers seek cheaper delivery options amid a slowing U.S. economy. The S&P 500 has closed 0.13% lower at 1,459 led by falls in commodity, financial and consumer discretionary stocks. The index is still 16% higher after three consecutive months of rises. Earlier in Europe, investor confidence was dented by another 'no result' EU meeting of finance ministers. The DAX lost 0.76% while the FTSE closed 0.43% lower.
Commodities have suffered significant falls for the second consecutive day with the CRB index losing 2.9 points to 311.56. WTI crude fell to a two week low after Saudi Arabia announced that it would take action to lower prices by increasing supply if necessary. Crude fell more than 1% to $95.50. Precious metals put in a good performance to consolidate near recent highs even as broad weakness permeated the markets. Gold rose 0.2% to $1,774 while silver gained 1% to $34.75. Soft commodities were broadly lower again led by losses in wheat, corn and soybean. Copper is trading flat.