US markets plunges ahead of Italy’s next debt auction

The US markets suffered significant losses on Wednesday, as investors were concerned about Italy’s next auction of government debt. Italy’s short-term debt costs fell at auction, boosted by the government’s recent austerity plan and inexpensive liquidity from the European Central Bank. But yesterday’s sale by Italy of 9 billion euros, or $11.8 billion, of six-month bills was viewed as less of a hurdle than Thursday’s planned sale of as much as 8.5 billion euros in longer-maturity debt. Meanwhile,the ECB stated that its lending to euro-area banks leapt last week as the Frankfurt-based ECB strived to keep credit moving amidst the region’s debt crisis.

However in US, the retailers reported better than expected sales on higher than expected discounting. US retailers’ sales at malls in the last week increased 4.5% from a year ago as shoppers took advantage of the last minute bargains. Sales in the week ending December 24 increased 0.9% from the previous according to an index tracked by International Council of Shopping Centers. Besides, Fed Chairman Ben Bernanke already has a press conference scheduled for January, as their two-day meeting which will end on January 25. Bernanke could double press briefings to improve understanding of policy changes that may include signaling interest rates will stay near zero longer.

The Dow Jones industrial average lost 139.94 points, or 1.14 percent, to 12,151.40. The Standard and Poor’s 500 closed lower by 15.79 points, or 1.25 percent, to 1,249.64, while the Nasdaq composite lost 35.22 points, or 1.34 percent, to 2,589.98.

The Indian ADRs closed in red on Wednesday, ICICI Bank was down by 0.88%, HDFC Bank was down 0.44%, Tata Motors was down by 0.34%, Infosys Technologies was down 0.34% and Dr. Reddy’s Lab was down by 0.26%.