Spain, growth worries pressure shares, euro

Updated 09 June 2012

Spain, growth worries pressure shares, euro

NEW YORK: Global stocks, the euro and oil prices fell yesterday after hopes for more stimulus from central banks faded, with Spain expected to become the fourth and biggest country to seek assistance since the euro zone’s debt crisis began.
Four senior EU officials said finance ministers of the 17-nation single currency area would hold a conference call today to discuss Spain’s request for an aid package for its ailing banks, although no figure had been set.
Losses in world shares followed a three-day rally built on expectations of global coordinated efforts to bolster slackening economic growth. But investors were disappointed after neither the European Central Bank nor the US Federal Reserve signaled near-term action.
“Financial markets are bipolar,” said Ward McCarthy, chief financial economist and managing director, fixed income division at Jefferies & Co. in New York. “Periodic fits of irrational exuberance are followed by the acknowledgement of reality. That is why it was risk on earlier this week and risk off today.”
MSCI’s world equity index was down 0.5 percent at 299.74. The index is still up 2.6 percent on the week, on pace for its best week since January.
US stocks turned positive after a lower open. The Dow Jones industrial average was up 9.46 points, or 0.08 percent, at 12,470.42. The Standard & Poor’s 500 Index was up 0.86 points, or 0.07 percent, at 1,315.85. The Nasdaq Composite Index was up 11.58 points, or 0.41 percent, at 2,842.60.
Top European shares trimmed early losses to trade 0.3 percent lower.
US President Barack Obama said European leaders face an “urgent need to act” to resolve the region’s financial crisis as the threat of a renewed recession there spells dangers for an anemic US recovery five months before elections.
The euro fell 0.7 percent to $1.2487, retreating from a two-week high of $1.2625 hit on T hursday.
More losses would leave the euro vulnerable to a test of the 23-month low of $1.2286 hit on June 1, using Reuters data, after failing to break above chart resistance at $1.2623, the January low.
Rating agency Fitch slashed Spain’s credit rating on Thursday, leaving it just two notches short of junk status. It signaled further downgrades could come as the country tries to restructure its troubled banking system.

Adding to the bearish sentiment was data showing Italian industrial production fell far more than expected in April and German imports tumbled at their fastest rate in two years.
Brent crude for July was down $1.98 to $97.95 a barrel, after hitting a low of $97.19.
US crude prices fell $1.71 to $83.11 a barrel, having touched a low of $82.00. Both contracts are down for a second day.
Copper fell to its lowest since December as investors feared China’s surprise interest-rate cut was a sign of a sharp slowdown in the world’s biggest metals consumer.
The metal, seen as a barometer of global economic health, is on track to extend its losing streak to a sixth week, its longest such run in two years.
Spot gold was at $1,583.06 an ounce, down from $1,589.15 late in New York the previous day.
The benchmark 10-year US Treasury note was up 14/32, the yield at 1.5962 percent.


Air Arabia disclosure draws investor attention to Abraaj fallout

Updated 9 min 59 sec ago

Air Arabia disclosure draws investor attention to Abraaj fallout

Air Arabia’s disclosure that it was an investor in Abraaj has focused investor attention on other market fallout after the buyout firm filed for voluntary liquidation last week.

Air Arabia shares held steady in Tuesday trading, a day after the stock tanked on the revelation the carrier was exposed to Dubai-based Abraaj.

The Sharjah-based carrier’s shares were slightly higher in afternoon trading, after slumping to an 11-month low on Monday.

It said it had appointed a “team of experts” to ensure the airline’s business interests are protected.

The size and nature of the Air Arabia investment was not disclosed.

“It will reduce the appetite for new venture capital or private equity funds,” said Jaap Meijer, head of equities research at Arqaam Capital.

Abraaj filed for a court-supervised provisional liquidation in the Cayman Islands last week, in a bid to head off petitions by creditors to wind up the firm, following allegations of financial mismanagement.

Abu Dhabi Capital Management, a unit of alternative investment group Abu Dhabi Financial Group, has made a conditional offer to buy Abraaj’s investment management business for $50 million, according to a document reviewed by Reuters.