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US markets slump on euro debt crisis concern

20 Dec 2011 Evaluate

The US markets ended lower on Monday, halting a two-day advance amid concerns that European officials were failing to make progress in taming the debt crisis. France faces a debt rating downgrade while France, Italy and Spain expand the list of nations facing early recession. Federal Reserve Bank of Richmond President Jeffrey Lacker predicted that the US economy will grow 2 percent to 2.5 percent next year, with inflation likely to meet central bank goals, and urged no additional stimulus. Investors were pessimistic on reports that the Federal Reserve is expected to embrace a new global framework that requires giant financial institutions to hold extra capital, a defeat for giant US banks.

In Europe, ECB President Mario Draghi undercut hopes that the central bank would be more aggressive in helping struggling countries by expanding its bond purchases, noting its governing treaty forbids monetary financing. The report was disappointing to investors who view ECB purchases of debt issued by European countries nearly squeezed out of the bond market as an important tool in ending the sovereign-debt crisis. The sentiments were further dampen after a statement from European Union finance ministers, who met by telephone, said euro-currency members had agreed on providing additional bailout funding via the International Monetary Fund. But the added resources -- 150 billion euros, or $196 billion -- fell short of the 200 billion euros proposed at the December 9 EU leaders’ summit.

The Dow Jones industrial average lost 100.13 points, or 0.84 percent, to 11,766.30. The Standard and Poor’s 500 closed lower by 14.31 points, or 1.17 percent, to 1,205.35, while the Nasdaq composite lost 32.19 points, or 1.26 percent, to 2,523.14.

The Indian ADRs too made a mixed closing on Monday, Infosys Technologies was down by 0.97%, ICICI Bank was down by 0.90% and Dr. Reddys Lab was down by 0.70%. On the flip side, Tata Motors was up by 0.22% and Tata Communications was up by 0.08%.

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