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US market slips on diminishing hopes of QE3

31 Aug 2012 Evaluate

The US markets slipped on Thursday, as a string of positive economic reports dimmed hopes that Federal Reserve Chairman Ben Bernanke would announce new stimulus on Friday. The market had spent much of the week in a narrow range ahead of Fed Chairman Ben Bernanke’s speech in Wyoming and by thinking that the next European Central Bank meeting would not deliver the promised results. Besides, the economic reports had consumer spending rising 0.4% in August and jobless claims holding steady last week. The seasonally adjusted initial jobless claims in the week ending August 25 were unchanged at 374,000 from the previous week. The 4-week moving average for claims was 370,250, an increase of 1,500 from the previous week's revised average of 368,750. On the other hand, consumers boosted their spending in July by the biggest amount in five months as after tax incomes continued to grow modestly, according to the latest government data. Personal spending rose a seasonally adjusted 0.4% on the month to mark the largest increase since February, the Commerce Department stated. The higher level of spending was in line with the expectations on the street.

In Europe, ECB president Mario Draghi’s decision to pull out of the Fed’s annual symposium provoked investors anticipating that within the ECB they do not have a consensus for a plan for supporting the peripheral bond markets in Europe. In Madrid, Spanish Prime Minister Mariano Rajoy held talks with French President Francois Hollande, with both men calling on the European Central Bank to act to lower borrowing costs for euro-area nations. Besides, Euro zone economic sentiment index declined to 86.1 in August from 87.9 in July. Consumer confidence fell to -24.6 in August from -21.5 in July. Confidence in services fell to -10.8 in August from -8.5 a month ago while business confidence rose by 0.06 points to -1.21 in August. Separately, Germany’s unemployment fell in July. The number of unemployed declined 137,000 to 2.41 million in July from a year ago.

The Dow Jones industrial average lost 106.77 points, or 0.81 percent, to 13,000.70. The S&P 500 Index lost 11.01 points or 0.78%, to 1,399.48, while the Nasdaq Composite was down by 32.47 points, or 1.05 percent, to 3,048.71.

The Indian ADRs closed mostly in red on Thursday, ICICI Bank was down 0.48%, Dr. Reddy’s Lab was down 0.41%, Infosys was down 0.34% and MTNL was down by 0.14%. On the other hand, Tata Communications was up 0.05%.

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