Stock Market Watch

Volatile Week for Stocks as Euro Zone Debt Crisis Worsens

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Global equity markets tumbled for the week ended November 25 as the debt crisis in the euro zone worsened. Investors’ sentiment was also weighed down by concerns about global economic growth and U.S. deficit impasse. But the focus remained on euro zone throughout the week.

The crisis in the euro zone has now spread to core economies of France and Belgium. France is under threat of losing its triple-A credit rating. Meanwhile, yields on country’s bond have continued to rise. The political stalemate in Belgium has also been a major concern for market participants. Belgium’s credit rating was downgraded on Friday by Standard & Poor’s by one notch.


Portugal and non-euro zone member Hungary also saw their credit ratings downgraded by rating agencies in the latest week. Meanwhile, yields on Italian and Spanish bonds have continued to rise, with Italian bond yields once again crossing the psychological 7% mark. On Friday, Italy paid an average yield of 6.5% at an auction of 6-year bonds, which is almost twice the yield it paid at a similar auction in October.

But the biggest surprise in the latest week was Germany’s failed bond auction. Germany, the largest and the strongest euro zone economy, saw lukewarm response to a 10-year bond auction earlier this week. German bonds are seen as safe haven assets and the weak demand in times of turmoil was bit of a surprise.  Analysts said that the weak demand may have been due to the fact that yields on German bonds are now too low.

The debt crisis in the euro zone has also started to take a toll on global growth. The data released in euro zone in recent weeks has indicated a looming recession in the region. Meanwhile, manufacturing data released in China this week suggested that the world’s fastest growing major economy is seeing a slowdown. Data released in the U.S. this week also painted a mixed picture of the economy.

Investors are also worried about the deficit impasse in the U.S. A supercommitte that was tasked with cutting the U.S. budget deficit failed to reach an agreement before the November 23 deadline. The failed agreement triggered automatic spending cuts of $1.2 trillion over ten years, starting in January 2013. Economists believe that the automatic spending cuts will hurt the already fragile U.S. economy.

All these factors contributed to one of the worst weeks for global equity markets. For the week ended November 25, the Dow Jones ended 4.78% lower, the S&P 500 ended 4.69% lower and the Nasdaq ended 3.83% lower.

Financials were among the worst performers for the week, with Bank of America Corporation (NYSE: BAC) falling 10.55%, Goldman Sachs Group Inc. (NYSE: GS) falling 3.44% and Citigroup Inc. (NYSE: C) falling 10.08%.

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edliston
Post Written By: Ed Liston

Ed Liston is a senior contributing editor at TheStockMarketWatch.com. An active market watcher and investor, Ed guides an independent team of experienced analysts and writes for multiple stock trader publications. He is widely quoted in various financial publications on the Internet. When Ed is not writing about stocks, investing in stocks, talking about stocks, or otherwise doing something stock related, he likes to go sailing and fishing in his yacht.


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Ed Liston

Ed Liston is a senior contributing editor at TheStockMarketWatch.com. An active market watcher and investor, Ed guides an independent team of experienced analysts and writes for multiple stock trader publications. He is widely quoted in various financial publications on the Internet. When Ed is not writing about stocks, investing in stocks, talking about stocks, or otherwise doing something stock related, he likes to go sailing and fishing.

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