Stocks, euro slip on Italian debt cost

Global stock markets and the euro fell on Wednesday on worries about record-high borrowing costs for Italy.Reuters reported on Wednesday that lack of new measures from the Federal Reserve to support growth despite warning that Europes debt crisis could, hurt the United States economy.Wall Street traded lower with the Standard & Poors 500 index last down by 0.6 per cent. An index of top European stocks shed 1.4 per cent, while Tokyos Nikkei closed down by 0.4 per cent.Investors were disappointed that the Fed gave no hints after its Tuesday meeting of new stimulus measures to offset the effects of the European crisis.The euro broke below $1.30 for the first time since January after Romes auction of five-year debt, with foreign exchange markets still speculating that more rating downgrades were in the works for euro-zone governments."The problem hasnt been solved. So, why would you want to buy the euro'" the Director of Currency Research at Action Economics in Tampa, Florida, Mr. Ronald Simpson, said, adding, "The problem is that nobody knows how this is going to end, including the politicians and policymakers."Italy paid a euro-era record of 6.47 per cent on its new five-year bonds, up from a previous record of 6.3 per cent set in November.Germany also sold debt, raising 4.2 billion euros in an auction of two-year bonds that sold at a euro-era record low yield of 0.29 per cent, compared with 0.39 per cent at the last such auction.The German sale, which drew bids worth 1.4 times the amount on offer, illustrated how desperate investors are to find a safe haven for their money.Benchmark US 10-year Treasury notes were up 6/32 in price for a yield of 1.94 per cent, the lowest level in more than two weeks.The dollar index, which tracks the greenbacks value against a basket of currencies, was up for a third straight day to its highest level since January. It was last up by 0.55 per cent at 80.675.The stronger US dollar was also having an impact on oil and industrial commodity prices, which were mostly softer. Copper in London fell by 3.6 per cent to $7,323 a tonne, a two-week low, while Brent crude declined by 2.5 per cent, or $2.70, to $106.80 a barrel. US oil futures were down by three per cent at $96.92.Gold fell by 1.6 per cent to $1,604.19 an ounce, its lowest since late October, after the fresh decline in the euro encouraged more non-US investors to take profit on their bullion holdings.On Tuesday, the euro plunged to an 11-month low on Tuesday and US stocks fell as worries about Europes debt crisis mounted and the Federal Reserve said market turbulence may pose risks for the US economy.The euro zone agreed to impose stricter budget discipline on members last week but markets were not convinced it had done enough to solve a two-year old debt crisis.As a result, investors were bracing for credit downgrades for multiple euro zone governments, possibly including France and Germany. That helped drive the euro as low as $1.3007, its worst showing since January.
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