DJI - NEW YORK, June 11
(Reuters) - U.S. stocks fell on Monday as Europe's aid package for Spanish banks did little to
alleviate investor concerns about the euro zone's finances and a
slowdown in the wider global economy.
The equity market bounced in early trading, but the rally was quickly snuffed out by sellers and a sharp decline accelerated into the market's close.
Spanish bond yields rose as a bailout of up to $125 billion for the country's struggling banks failed to quell concerns that Madrid may be locked out of funding markets and forced to seek external help.
"They're borrowing more money, not doing anything about growth," Paul Zemsky, head of asset allocation at ING Investment Management in New York, said. "Today we're not worried about Spain's banking system falling off a cliff, but other than that, nothing has changed."
The New
York-traded stock of Spanish lender Banco Santander fell 3.1 percent to $5.92. Weakness in Europe's financial
sector was mirrored in the United States where the S&P
financial index fell 1.9 percent and was the weakest
performing sector.
Shares of Morgan
Stanley , which has recently been a barometer of concerns about Europe due to perceptions of the investment bank's exposure to the region, fell 2.5 percent
to $13.37.
Spain's 10-year
bond yieldsended higher at 6.5 percent as an early rally in prices quickly evaporated.
Some investors were concerned the new debt would put existing bondholders lower in the capital structure, which increases
the risk for those holders.
"This is a realization that Spain, while providing money for its banks, is going to add to its debt-to-GDP ratio, and it's going to potentially subordinate some of the current Spanish sovereign debt, which doesn't make those bondholders happy," said Zemsky.
The Dow Jones
industrial average <.DJI> dropped 142.97 points, or 1.14 percent, to 12,411.23. The Standard &
Poor's 500 Index <.SPX> fell 16.73 points, or 1.26 percent, to
1,308.93. The Nasdaq Composite Index <.IXIC> lost 48.69 points,
or 1.70 percent, to 2,809.73.
Investors fear a
crisis in Spain would compound the currency bloc's troubles as June 17 elections loom in Greece, which
many think could lead to Greece's exit from the euro zone.
The worries come
at a time when economies the world over are showing signs of slowing. China's inflation, industrial output and retail sales all flagged in May. It was the second
straight month of sluggish growth.
Trading volume was
light on the NYSE, Nasdaq and AMEX with 6 billion shares traded, about 14 percent below its 10-day
moving average. About four shares fell for every one that rose on
NYSE.
U.S. companies are
finding it more difficult to increase revenue now than at just about any time since the financial crisis. Firms that make up the S&P 500 are expected to
boost sales by just 2.2 percent in the current quarter, according
to Thomson Reuters data.
AK Steel Holding
Corp tumbled 14 percent to $4.99 after two brokerages cut their ratings on the small cap, including a "sell" rating from Goldman Sachs,
which cited a highly leveraged balance sheet and weak steel prices.
U.S. steelmakers are struggling with weak demand, rising costs and narrowing margins. Production capacity has yet to fully recover from the most recent recession.
NYMEX - NEWYORK, June 11
(Reuters) - U.S. crude futures were lower for a third straight session on Monday, and set a new 2012
low in late trading, as an early rally on EU's rescue of Spanish banks faded amid investors raising questions about the aid package and focused on other troubled euro zone nations like Greece.
Leading oil
producer Saudi Arabia called for an increase in OPEC's output target, despite falling oil prices, further
adding to bearish sentiment in the oil markets.
The euro fell
against the U.S. dollar and equities ended lower on disappointment over the Spanish aid package, to
keep oil futures under pressure.
Also bearish for
crude was news that an outage at a new crude distillation unit at Motiva Enterprises' 600,000
barrels per day refinery in Port Arthur, Texas, -- the nation's
largest -- would be offline for at least two months and potentially
five months, for repairs, sources familiar with operations said.
Ahead of weekly
inventory reports, U.S. crude oil inventories were forecast down 1.5 million barrels last week with analysts citing lower imports in a Reuters poll.
Distillate stocks
were predicted up 1.0 million barrels while gasoline stocks were expected to show a
1.5-million-barrel increase, the poll also showed.
The American
Petroleum Institute will issue its report for the week to Jan. 8 on Tuesday, after the oil markets
close.
That will be followed by the report from the
U.S. Energy Information Administration, due Wednesday morning.
CBOT SOYBEAN - Soybean futures on
the Chicago Board of Trade were lower at the close of pit trading, pressured by declines in U.S. equities
and crude oil after traders digested potential fallout from a
euro zone deal to shore up Spain's banks.
* Yet nearby soybean
contracts gained against deferreds on spreads, one day ahead of a monthly government crop report
that analysts expected to show smaller U.S. old-crop soy
inventories.
* Nearby July
soybeans traded on both sides of unchanged in the final minute before the close of pit trade
at 1:15 p.m. CDT (1815 GMT).
* Analysts expect USDA's monthly supply/demand report on Tuesday to show a smaller forecast of U.S. 2011/12 soybean ending stocks while leaving 2012/13 U.S. soy ending stocks roughly unchanged.
* CBOT was set to open pit trading at 7:20 a.m. (1220 GMT) on Tuesday, more than two hours earlier than normal, so both the pits and the electronic trading platform will be open when USDA releases its monthly supply/demand report.
* Nearby soybean contracts underpinned by fears of supply disruptions out of South America. Grain trucks entering Argentina's main port of Rosario slowed to a trickle due to a five-day-old sales strike by farmers, but exports were uninterrupted because of dockside reserves.
* USDA's weekly crop progress report later Monday was expected to show the U.S. soybean crop rated 63 percent good to excellent, down 2 percentage points from the previous week, according to a Reuters survey of 12 analysts.
* The U.S. corn and soybean crops are likely to face stress from overall dry conditions for at least the next two weeks, trimming production potential, an agricultural meteorologist said Monday.
* USDA reported export inspections of U.S. soybeans in the latest week at 14.215 million bushels, within a range of trade estimates for 13 million to 16 million.
FCPO SINGAPORE, June 11
(Reuters) - Malaysian palm oil rose on Monday on a bigger-than-expected stock draw although gains
were curbed by concerns the euro zone debt crisis was far from resolved even after the bloc agreed on a rescue package for Spain's struggling banks.
The $125-billion bailout calmed some of the fears seen last week that triggered a global sell-off in the financial markets and dragged palm oil to its lowest in the year.
But investors are now focusing to Greek national polls on June 17 that could put Athens on a path out of the bloc and trigger a deeper crisis over the future of the currency bloc.
For now, Malaysian palm oil stocks at a 13-month low in May have been holding up the market although some traders said the 4.5 percent drop from a month ago was already priced in.
Traders are also eyeing a supply-demand report on U.S. and global grains from the U.S. Department of Agriculture (USDA) due Tuesday that could show tighter supply and lend support to palm oil.
"There was a sense that the Malaysian stocks numbers are bullish but the euro zone debt crisis clouds over everything," said a trader with a foreign commodities brokerage in Kuala Lumpur.
Benchmark August palm oil futures
Traded volumes stood at 32,538 lots of 25 tonnes each, higher than the usual 25,000 lots.
On the technicals
front, palm oil faces resistance at 3,038 ringgit per tonne, said Reuters market analyst Wang Tao.
Malaysian palm oil exports for the first 10 days of June fell 6.6 percent, said cargo surveyor Intertek Testing Services, going against traders' expectations of a stronger demand ahead of the Muslim fasting month starting in mid-July.
"This is quite a surprise. But we still expect real demand to come in the later part in June," said a dealer based in Malaysia.
Another cargo surveyor Societe Generale de Surveillance reported a slight 1.8 percent increase for exports in the same period.
REGIONAL EQUITY - BANGKOK, June 11
(Reuters) - Southeast Asian stock markets ended mostly higher on Monday as a bailout for Spanish banks improved sentiment, with Thai stocks leading the way amid a flurry of short covering in large cap shares.
Thailand's benchmark SET index <.SETI> posted its biggest daily gain in eight months, finishing up 2.8 percent at 1,158.07, led by PTT Pcl
"There's a strong buying position for short covering today. Foreign investors were quite active and I think the market seems set for a good rebound from this point," said Viwat Techapoonphol, senior strategist at broker Tisco Securities
Stocks in Singapore <.FTSTI>, Malaysia <.KLSE>, Indonesia <.JKSE> and the Philippines <.PSI> gained 1.8 percent, 0.5 percent, 1.1 percent and 1.6 percent, respectively.
The Philippine market will be shut for a holiday on Tuesday and will reopen on Wednesday.
