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US markets slip as European debt fear mounts

24 Jul 2012 Evaluate

The US markets slipped on Monday, as worries about Europe’s fiscal health flared back. It was the first consecutive two-day triple-digit point loss for the Dow since April 10, as concern rose on deepening Euro zone’s debt crisis. There were some weak corporate earnings too, McDonald’s closed down after the fast-food giant faced headwinds on reporting second-quarter earnings that fell short of estimates. But what really weighed on the broader market was the prospect that Spain, Europe’s fourth-largest economy, might require a sovereign bailout, after another region in the country stated that it would need financial aid. The Spanish region of Murcia announced it could apply for government bailout funds in September. That comes on the heels of reports that Spain’s Valencia region was seeking help.

In Europe creditors of Greece will meet this week amid doubts that the country will meet its bailout commitments. German Vice Chancellor Philipp Roesler stated he’s very skeptical that European leaders will be able to rescue Greece. The International Monetary Fund is set to stop aid payments to Greece, raising the odds that the nation will become insolvent as early as September. The Troika of international groups overseeing Greece’s aid - the European Commission, the International Monetary Fund and the European Central Bank (ECB) - are due to send inspectors to Athens this week to gauge progress toward the requirements of its assistance program.

Moreover, Spanish and Italian market regulators both imposed a ban on the short selling of stocks in the wake of steep losses for equities markets in Europe. In addition, the euro area government debt rose to 88.2% of gross domestic product in the first quarter from 87.3% in the previous quarter. Besides, Moody's Investors Service lowered the outlook on Germany's triple-A rating to negative from stable due to mounting uncertainties from the euro-zone debt crisis. Moody's also downgraded the outlooks on the Netherlands and Luxembourg and affirmed Finland's triple-A rating.

The Dow Jones industrial average lost by 101.11 points, or 0.79 percent, to 12,721.50. The S&P 500 Index lost 12.14 points, or 0.89 percent, to 1,350.52, while the Nasdaq Composite was down 35.15 points, or 1.20 percent, to 2,890.15.

The Indian ADRs closed mostly in red on Monday, ICICI Bank was down 1.38%, HDFC Bank was down 1.14%, Tata Motors was down 0.83% and Infosys was down 0.74%. On the flip side, MTNL was up 0.01%.

 

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