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US markets suffers sharp plunge on weak data

22 Jun 2012 Evaluate

The US markets dropped sharply on Thursday, taking their second hardest knock so far this year as economic reports indicating a slowdown in global manufacturing increased investor anxiety. Also data illustrating slowdown in euro-area manufacturing and Chinese output contracting added negative sentiments. A gauge of factory activity in and around Philadelphia plunged in June, raising fears the economy could be in a new soft-patch. Factory activity in the Philadelphia region fell to its lowest level in more than 10 months in June, the Philadelphia Federal Reserve Bank stated.  Also, the number of Americans who applied for unemployment benefits fell slightly last week but remained at a level, indicating virtually no improvement in hiring trends or labor market conditions, according to the latest federal data. Jobless claims declined by 2,000 to a seasonally adjusted 387,000 in the week ended June 16, the Labor Department stated. Claims from two weeks ago were revised up to 389,000 from an original reading of 386,000, based on more complete data collected at the state level.

Besides, sales of existing homes fell 1.5% in May as fewer cheap homes were sold, a trade group stated. The National Association of Realtors stated that sales for the month yielded a seasonally adjusted annual rate of 4.55 million, down from an unrevised pace of 4.62 million in April. However, the Conference Board’s index of leading economic indictors rose 0.3% in May, with the better-than-expected jump offering at least one bright spot in the economic reports. The risk of a downturn in the second half of this year is relatively low.

In Europe, Spanish officials released the results of an audit of the country’s banking sector. The stress tests of Spanish banks carried out by two independent auditors showed aggregate capital needs for financial institutions in an adverse scenario of between €51.8 billion and €62 billion ($65.7 billion and $78.7 billion).However, the Spanish government succeeded in selling €2.2 billion of various maturities, exceeding the high end of its target range of €1 billion to €2 billion. Separately, Moody's has downgraded financial companies in US, Canada and Europe. Moody's Investors Service downgraded a handful of financial companies with global capital-market operations, as part of its broad review to account for sluggish economic conditions and tougher regulations.

The Dow Jones Industrial Average closed lower by 250.82 points or 1.96%, at 12,573.60. The S&P 500 finished the day down by 30.18, or 2.23 percent, to 1,325.51 while the Nasdaq closed down by 71.36 points or 2.44 percent, to 2,859.09.

Most of the Indian ADRs closed in red; Infosys was down by 1.59%, Tata Motors was down 1.01%, Dr. Reddy’s Lab was down 0.70% and HDFC Bank was down 0.70%. On the flip side, Tata Communications was up 0.01%.

Most of the Indian ADRs closed in red; Infosys was down by 1.59%, Tata Motors was down 1.01%, Dr. Reddy’s Lab was down 0.70% and HDFC Bank was down 0.70%. On the flip side, Tata Communications was up 0.01%.

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