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US markets slip on Euro debt crisis and weak economic reports

29 Sep 2012 Evaluate

The US markets slipped on Friday, with the Standard & Poor’s 500 Index posting its biggest drop since June, on concern that Europe’s debt crisis is worsening and stimulus measures may not be enough to boost economic growth. Besides, business activity in the US unexpectedly contracted in September for the first time in three years, adding to signs that manufacturing will contribute less to the economic recovery. The Institute for Supply Management-Chicago Inc. stated that its business barometer fell 49.7 this month from 53 in August. A reading of 50 is the dividing line between expansion and contraction. Though, consumers boosted spending in August by the biggest amount in six months, but their wages grew more slowly so they had to dip into their savings to pay for their purchases. Spending rose by 0.5% in August - the fastest rate since February - and marked the second straight sharp gain. Spending is watched closely because it accounts for more than two-thirds of US economic growth.

In Europe, Spanish stress tests found the nation’s banks have a combined capital shortfall of 59.3 billion euros. Of 14 lenders, seven banks had no capital deficit. Spain commissioned the study as part of the conditions agreed in July for a European bailout of as much as 100 billion euros for its banking system. Separately, Fitch Ratings affirmed the United Kingdom’s triple-A sovereign rating but warned that the likelihood of a downgrade has increased due to its sizeable budget deficit. Still, weaker-than-expected growth and fiscal output this year have increased pressure on the country's rating, the ratings agency stated.

The Dow Jones Industrial Average lost 48.84 points, or 0.36 percent, to close at 13,437.10, the S&P 500 finished down by 6.48 points, or 0.45 percent at 1440.67, while the Nasdaq ended lower by 20.37 points, or 0.65 percent to settle at 3116.23.

Indian ADRs closed mostly in green on Friday, Tata Motors was up by 1.01%, Infosys was up by 0.81% and Dr. Reddy’s Lab was up 0.59%. On the other hand, Tata Communications was down by 0.11% and MTNL was down by 0.04%.

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