Euro debt concerns weigh on world stocks; oil steady
Concerns about the euro zone debt crisis weighed on world stocks and lifted Portugal's yields to a new euro-era peak on Wednesday, while crude oil held steady off highs following reassurances on supply from OPEC states.
March 09, 2011 / 20:15 IST
Concerns about the euro zone debt crisis weighed on world stocks and lifted Portugal's yields to a new euro-era peak on Wednesday, while crude oil held steady off highs following reassurances on supply from OPEC states.
European stocks ticked lower and Asian indexes were little changed as investors awaited a Portuguese bond auction to gauge investor appetite for euro zone debt ahead of a summit on Friday at which leaders will discuss new measures to tackle the region's fiscal crisis.The debt concerns soured investor morale even as oil held steady having come off highs following reassurances of ample spare capacity from major oil-producing states. A recent spike in oil prices has fanned inflation concerns and raised expectations for interest rate rises, especially in the euro zone."With the Portuguese bond auction today and euro zone sovereign debt issues coming back to the forefront, the market could be in for a turn," said Matt Brown, trader at Catalyst Markets.World stocks as measured by the MSCI world equity index and the Thomson Reuters global stock index were steady on the day.The FTSEurofirst 300 index tipped into negative territory.Brent crude rose 0.2% to USD 113.33 a barrel while US crude fell 0.4% to USD 104.61.Portugal in focusPortugal will have to pay a higher premium than previously to sell up to 1 billion euros of 2-year bonds in an auction expected later.The yield on 10-year Portuguese government bonds hit a new euro lifetime high of 7.77% while the cost of insuring Portugal's debt against default rose 14 basis points to 500 bps."The auction will be a very important market test in the current environment," Unicredit strategist Chiara Cremonesi said.March bund futures were up 22 ticks.The US dollar rose around 0.1% against major currencies. The euro was down 0.3% at USD 1.3870 as doubts grew that Friday's European summit would quell concerns about the region's fiscal problems.The 17 heads of state are expected to agree on the next cautious steps in their year-long effort to quell the region's debt crisis but are unlikely to produce a breakthrough. Spanish and Italian ten-year yield spreads versus benchmark German Bunds were 8-9 basis points wider on the day to hit their highest levels since mid-January."The market is starting to realise it's not just a case of market access but with the ECB starting to hike interest rates, the cost of borrowing is going to rise and that's being factored in too," said WestLB rate strategist Michael Leister.European governments have wrangled for almost a year over solutions to stem the region's debt crisis. Discover the latest Business News, Sensex, and Nifty updates. Obtain Personal Finance insights, tax queries, and expert opinions on Moneycontrol or download the Moneycontrol App to stay updated!
