A Quick Look at the Financial Markets

Worries over Europe have heightened especially keeping Spain and Italy in mind and due to this risk aversion has hit the global financial markets, leading to a downside pressure in Asian equities. In yesterday’s trade, US equities also ended lower with the Dow Jones and the S&P 500 losing more than 1 percent each.

Bond yields in Spain and Italy increased, and at the same time uncertainty with respect to Greece continued. The yield on the 10-year Spanish government bond increase 22.2 basis points to 6.685, while yields on Italy’s government bond raised 17.4 basis points to 6.068 percent. 

US Pending Home Sales declined by 5.5 percent in April from previous rise of 3.8 percent a month ago. This further added to weakening sentiments in the global markets.

The US Dollar Index (DX) strengthened in yesterday’s trade on the back of rising risks associated with the European economic crisis. With Spain and Italy coming under the radar amid the already existing Greek concerns, investors are not getting a breather. Also, the US economy is fairly at a better economic state of affairs and the DX is thus inviting investors due to rising volatility in the Euro. 

Approaching the lowest level in almost two years against the dollar, the Euro continued to remain under pressure in yesterday’s trade. Concerns hit the markets that the European debt crisis was spreading to the region’s major economies and this led to fear of further economic problems.

European M3 Money Supply increased at slow pace of 2.5 percent in April as against a rise of 3.1 percent a month ago. Private Loans rose at slow pace of 0.3 percent in April from 0.6 percent in March. Retail PMI increased by 2 points to 43.3-level in May compared to 41.3-mark in last month.

Spot gold prices increased 0.4 percent yesterday as buying emerged at lower levels during late trade yesterday as the yellow metal tested a low of $1531/oz.  However, strength in the DX restricted further upside in gold prices. The yellow metal touched an intra-day high of $1569/oz and closed around $1562/oz in yesterday’s trading session.

Nymex crude oil prices declined more than 3 percent yesterday on the back of unfavorable economic data from the US, which led to expectations of reduction in fuel demand. Additionally, strength in the DX also exerted downside pressure on crude oil prices. It touched an intra-day low of $87.27/bbl and closed at $87.82/bbl in yesterday’s trading session.

As per the American Petroleum Institute (API) report last night, US crude oil inventories declined unexpectedly by 0.3 million barrels to 385.90 million barrels for the week ending on 25th May 2012.

Due to the US holiday on Monday, The US Energy Department (EIA) is scheduled to release its weekly inventories report today and US crude oil inventories are expected to rise by 0.6 million barrels for the week ending on 25th May 2012

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