The news that the heavily indebted
region of Valencia asked Madrid for financial aid interrupted a period of
relative calm for Wall Street and raised the specter that the euro zone's
fourth-largest economy may itself need to be rescued.
Bank shares, sensitive to signs of
trouble in Europe, were among the biggest losers. The KBW bank index fell 1.9 percent, taking its weekly decline to 2.3 percent. Shares in Morgan
Stanley fell 3.5 percent to $12.78.
Valencia, which already used several
government credit lines in the first half of the year to meet debt repayments,
still needs to repay 2.85 billion euros by the end of the year. That figure is
not huge compared to the billions used in other EU bailouts, but investors are
concerned about the overall stability of the country and its banks.
"We don't want to go to a full
Spanish bailout if we don't have to," said Paul Mendelsohn, chief
investment strategist at Windham Financial Services in Charlotte, Vermont.
"Maybe the market is just over reacting to it, but these days you never
know."
The Dow Jones industrial average was down 120.79 points, or 0.93 percent, at 12,822.57. The Standard &
Poor's 500 Index was down 13.85 points, or 1.01 percent, at 1,362.66. The
Nasdaq Composite Index was down 40.60 points, or 1.37 percent, at 2,925.30.
The euro slid broadly, setting a
two-year low against the dollar. The single currency fell as low as $1.2143, its weakest level since mid-June 2010. Spanish
benchmark bond yields hit euro-era highs as the yield on the 10-year bond
reached 7.3 percent.
Europe had been on the back burner
for much of July, allowing Wall Street to move higher. Since early June the
S&P 500 has gained about 7 percent, helped by a deal to save
Spanish banks and a European Union summit that pointed to greater resolve among
EU leaders.
Even with Friday's loss, the S&P
500 posted its second weekly gain in a row, climbing 0.4 percent. The Dow ended
up 0.4 percent and the Nasdaq composite index rose 0.6 percent for the week.
The resurfacing of euro zone debt
problems in the headlines was a reminder that the bloc's problems are far from
over. Spain's government also cut its economic growth forecast, indicating the
country would stay mired in recession well into next year.
"It looks as if Europe is
taking center stage again, with Spain as the main act," said Quincy
Krosby, market strategist at Prudential Financial in Newark, New Jersey.
A gauge of European banks dropped 3.7 percent and Spain's equity benchmark fell 5.8 percent, its largest daily percentage drop in more than two years.
The S&P on Thursday hit a 2-1/2
month high as record high prices in Treasuries kept yield-seekers focused on
stocks despite a softening economy. Bets on further Federal Reserve action in
support of the economy are also credited for helping equities to hold up
despite poor economic data.
About 6.7 billion shares changed
hands on the New York Stock Exchange, the Nasdaq and Amex, inline with the
50-day moving average.
Decliners beat advancers by a ratio
of about 2 to 1 on the NYSE and on the Nasdaq by almost 3 to 1.
NYMEX- NEW YORK,NEW YORK, July 20 (Reuters) - U.S. crude futures fell on Friday, snapping a string of seven higher finishes, as the euro zone debt crisis brought economic concerns back in focus and strengthened the dollar. The front-month August contract expired at the end of the session.
CBOT SOYBEAN- Chicago Board of Trade soybean futures soared to a record high as the U.S. Midwest drought worsened and on strong cash markets, tight stocks, slow farmer selling and strong soymeal, traders said.
* Spot soybean futures rose to a
record high $17.77-3/4, above the previous record of $17.49 set on Thursday and
up 35 percent in only six weeks.
- No change in weather forecasts were noted on Friday
with hot and dry weather expected from now through early August in the
central and western U.S. Midwest which will cause further damage to corn
and soybean crops that already have been nearly decimated in some areas,
an agricultural meteorologist said on Friday.
- "It will be dry and very hot in the area with
temperatures in the 100s (degrees Fahrenheit) in St. Louis Sunday through
Thursday reaching 106 F on Wednesday," said Don Keeney, meteorologist
for MDA EarthSat Weather.
- The United Nations food agency is worried about an
ongoing drought-fuelled grain price rally and sees no respite in price
rises for the time being, a senior economist and grain expert at the Food
and Agriculture Organisation (FAO) said on Friday.
- Low water on the Mississippi River reduced allowable
barge drafts and restricted tow sizes, resulting in a slowdown in the flow
of grain and soybeans to the Gulf, shipping sources said. Little relief in
sight for river levels as the largest U.S. drought since 1956 continues to
expand.
- August is above all key moving averages. The nine-day
RSI was at 88.
FCPO- SINGAPORE, SINGAPORE, July 20 (Reuters) - Malaysian crude palm oil futures ended lower on Friday, as expectations of higher palm oil stocks in Malaysia offset concerns over crop-damaging weather in the U.S. Midwest that lowered soybean oil supply.
Palm oil futures posted an 0.8
percent weekly loss, as weather-driven gains were capped by weak exports and
higher production in No.2 producer Malaysia, which could push stocks up in July
after they fell to a 14-month low last month.
"From the inventory level
alone, it is negative to prices. But the dry season in the United States is
still very much in the picture," said Alan Lim, research analyst with
Malaysia's Kenanga Investment Bank.
The benchmark October palm oil
futures on the Bursa Malaysia Derivatives Exchange were down a
slight 0.1 percent to close at 3,042 ringgit ($965) per tonne.
Traded volumes stood at 25,325 lots
of 25 tonnes each, slightly higher than the usual 25,000 lots.
Malaysia's palm oil exports fell 23
percent over the July 1-20 period from a month ago, cargo surveyors Intertek
Testing Services and Societe Generale de Surveillance said.
Slower exports, coupled with higher
output expected for July, could boost palm oil stocks and ease concerns about
tight oilseeds supplies.
Late on Thursday, India lifted a
six-year-old freeze on the base import price of refined palmolein, a move that
will make palm oil imports from Indonesia more costly.
Traders said the move to protect
domestic refiners could support crude palm oil prices as the demand outlook for
the feedstock brightens.
The move, which effectively doubled
import taxes on refined products of the edible oil, could also see a drop in
exports and push rival Malaysia to overhaul its taxes.
In related market, Brent crude
slipped below $107 per barrel on Friday as worries about a conflict in the
Middle East eased slightly, lowering palm oil's appeal to be used as an
alternative for biofuel.
In other vegetable oil markets, the
most active U.S. soyoil for December delivery was almost flat while the most active January 2013 soyoil contract on the Dalian Commodity Exchange closed 0.2 percent higher.
REGIONAL EQUITY-July 20 (Reuters) - Most Southeast Asian markets eased on Friday in thin trading volumes as Spain borrowing cost weighed on investor sentiment, but Malaysia and Indonesia saw foreign inflow into equity despite falls.
Malaysia,
despite edging down 0.1 percent, enjoyed a foreign inflow of $72.55 million,
while Indonesia saw $6.56 million net foreign buying, though the stock
market fell 0.4 percent.
Optimism over strong corporate
earnings in the previous day evaporated due to renewed fears over Spain's
borrowing costs, which hovered around their seven percent pain threshold on
Friday, despite the expected approval of its bank bailout plan later in the
day.
Singapore shares fell 0.4 percent from a one-year closing high, snapping five consecutive
sessions of gains, while Thailand also fell 0.4 percent led by energy and banking shares.
Bucking the trend, the Philippines gained 0.4 percent after falling in the previous three sessions.
