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Global stocks slump as bank bailouts mount in EU

MARKET CLOSE: US investors are sceptical Europe has the leadership to cope with its banking crisis.

Nevil Gibson
Tue, 26 Jun 2012

Stocks on Wall Street extended last week's decline as the pall of Europe outweighed upbeat US data on housing and manufacturing.

New single-family home sales in May increased 7.6% from April to a seasonally adjusted annual rate of 369,000, the highest rate in more than two years.

The Federal Reserve Board of Dallas reported that business activity in the region jumped this month, up 5.8 after dropping 5.1 last month as the production index surged to 15.5 from 5.5.

But bad news continued to roll out of Europe and US investors were sceptical the leadership there can cope with the mounting series of banking bailouts.

Spanish has formally requested an EU bailout for its banks but the specifics remained unclear. Fitch Ratings downgraded Cyprus' government debt rating to junk status as that country became the sixth in the EU to request a bailout for one of its biggest banks.

In Greece, the new finance minister resigned after being admitted to hospital while the prime minister is recovering from eye surgery and won't be able to attend the EU summit planned for later this week.

The Dow Jones Industrial Average plunged 138.12 points, or 1.1%, to close at 12,502.66 (8am NZ time).

The S&P 500 index dropped 1.6% to 1313.72. Energy and financial shares led declines across all 10 of the index's sectors, though defensive stocks such as utilities performed relatively better. The Nasdaq Composite retreated 1.9% to 2836.16.

Other markets: Europe, Asia slump
Italian and Spanish shares fell sharply while Spanish bond yields surged, as investor expectations diminished ahead of the EU summit.

Bank stocks were big losers on fear of further ratings downgrades.

The Stoxx Europe 600 index slid 1.5% to 242.82. The UK's FTSE 100 index fell 1.1% to 5450.65, France's CAC-40 declined 2.2% to 3021.64 and Germany's DAX dropped 2.1% to 6132.39.

Spain's IBEX 35 index slumped 3.7%, its biggest one-day drop since April, and Italy's FTSE Mib index tumbled 4%.

China shares ended at a 23-week low as Asian stock markets also slumped.

The China Shanghai Composite dropped 1.6% to 2224.11, and Hong Kong's Hang Seng Index lost 0.5% to 18897.45.

Japan's Nikkei Average slipped 0.7% to 8734.62 after opening higher, Korea's Kospi closed down 1.2% to 1825.38 and Australia's S&P ASX 200 finished 0.5% lower at 4027.80.

India's Sensex fell 0.5%, to 16,882.16.

Commodities: Oil slide continues
Oil prices resumed their slide , extending a decline for three of the past four sessions. Futures are down 8.5% so far in June..

Light, sweet crude for August delivery fell 55USc, or 0.7%, to settle at $US79.21 a barrel in New York. Brent crude on the ICE futures exchange for August delivery added 3USc to $US91.01 a barrel.

Gold futures rallied as investors adjusted their holdings ahead of a contract expiration.

The most actively traded contract, for August delivery, gained $US21.50, or 1.4%, at $US1588.40 an ounce in New York.

Currencies: US dollar rises
The US dollar strengthened against the euro and other major rivals as investors shied away from risky assets.

The euro was at $US1.2487 from $US1.2570 late on Friday. The dollar traded at ¥79.60 compared with ¥80.43, while the euro was at ¥99.390 compared with ¥101.14.

The pound bought $US1.5561 from $US1.5587, and the dollar fetched 0.9617 Swiss franc from 0.9553 franc.

Nevil Gibson
Tue, 26 Jun 2012
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Global stocks slump as bank bailouts mount in EU