The US markets closed in negative terrain on Wednesday, leaving the Dow industrials in the red for a sixth straight session, as investors fretted about political uncertainty in Greece and concern grew that Spanish banks are underfunded. In US, the global investors gave Federal Reserve Chairman Ben S. Bernanke his highest approval rating since 2009 and expect him to take further action this year to accelerate a revival in the US economy and financial markets. The Fed got a lot of credit from investors for its handling of the US economy, based on the poll. Four in five said that Fed has done a better job in handling the problems facing the US economy than the European Central Bank has had in coping with its region’s troubles. The financial crisis in Europe is seen as a ‘high threat’ to the global economy over the next year, according to more than half of those polled.
Moreover, the board of directors of the euro-zone rescue fund stated in a statement that it will hold back on disbursing €1 billion of aid to Greece which was supposed to be part of a €5.2 billion tranche. As part of its international bailout, Greece will receive €4.2 billion on Thursday, the European Financial Stability Facility (EFSF) stated. The remaining €1 billion are not needed before June and will be disbursed depending on the financing needs of Greece, the EFSF added.
However, mounting concerns over Spanish banks and fears that Greece’s political vacuum could lead to an exit from the euro zone fueled fresh turmoil in European credit markets. Spain will require its banks to raise an additional 35 billion euros ($45.5 billion) in provisions against bad property loans. The amount is in addition to the €54 billion banks must already raise. Besides, the cost of insuring Spanish government debt against default via credit default swaps jumped, with the spread widening 19 basis points. Also, concern that Greece will be forced out of the euro zone grew after weekend elections resulted in a parliament divided over whether to implement austerity measures needed to qualify for rescue funds. The nation’s political turmoil was set to enter a fourth day with coalition talks deadlocked, raising the possibility that another election will have to be held. Alexis Tsipras, head of the Coalition of the Radical Left, or Syriza, was set to meet with conservative New Democracy leader Antonis Samaras and Evangelos Venizelos, head of the Socialist, or Pasok, party. Tsipras has called for tearing up the terms of Greece’s bailout, contending the results of the parliamentary elections, which saw pro-austerity New Democracy and Pasok garner less than 40% of the total vote, amount to a repudiation of the deal.
The Dow Jones Industrial Average closed lower by 97.03 points, or 0.75 percent, at 12,835.10. The S&P 500 lost 9.14 points, or 0.67 percent, at 1,354.58, while the Nasdaq was down by 11.56 points, or 0.39 percent, at 2,934.71.
Indian ADRs closed in red on Wednesday; Dr. Reddy’s Lab was down 0.75%, Tata Motors was down 0.69%, Infosys Technologies was down 0.60%, HDFC Bank was down 0.44% and ICICI Bank was down 0.27%.
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