Wall Street entered the fourth quarter in the red as concerns grew over the impact of a Greek default, after Greece admitted that it will miss its deficit target this year.
Better-than-expected economic data did manage to push US equities higher for a short period, but this was short-lived. By 4pm (London time) the Dow Jones and S&P 500 were both 0.63% lower, at 10,846.18 and 1124.28 respectively.
In London the FTSE 100 dropped almost 1.5% to 5052.69, with the broader FSTE 250 down over 1% at 9714.25 as a warning from Standard & Poor’s dampened market sentiment.
US economic data surprisingly upbeat
In financial spread betting, the S&P 500 and Dow Jones briefly cut their opening losses this afternoon after US economic data showed that factory activity expanded at a faster pace than expected in September, as production and hiring increased. The latest sign of resilience in manufacturing, despite faltering economic growth, was the ISM manufacturing figures which rose to 51.6 last month from 50.6 in August.
The ISM index of prices paid rose to 56 from 55.5, factory employment rose to 53.8 last month from 51.8 in August, while production climbed to 51.2 from 48.6. Separately, data also revealed that construction spending increased in August by 1.4%, surpassing economists' expectations, after a downward revision to -1.4% the previous month.
Though the data proved to be better than forecast and momentary lifted US and European equities, the eurozone debt crisis soon took precedence and pushed markets back into negative territory.
Standard & Poor's searches for its next target
Today ratings agency Standard & Poor's announced that Britain's coveted triple-A sovereign debt rating could come under pressure if the government strays from its path of public deficit cuts in the face of weaker growth.
Though Standard & Poor's reaffirmed its triple-A rating and said the outlook was stable, it warned that growth was likely to be slower than the government expected, and that rating could come under downward pressure if the government's commitment to fiscal consolidation faltered.
Britain's economy has been virtually stagnant for almost a year; however an unexpected pickup in manufacturing activity in September, released today, dented expectations that the Bank could inject more stimulus to boost the economy. UK manufacturing rose to 51.1 after contracting to 49.4 in August.
Commodities prices drop
Commodities fell to a ten-month low today as signs of a contraction in European manufacturing signalled a slowdown in demand for raw materials.
A report today revealed that manufacturing in the eurozone continued to contract, slipping to 48.5 in September from 49 in August. With Europe accounting for almost one fifth of global copper demand, the red metal, along with corn and sugar, led declines today.
Crude also continued its decline today after closing on a one-year low last Friday. Light-sweet crude for November delivery declined over 2% today to a low of $76.85 per barrel, while Brent crude for November delivery fell almost 1.5% to $100.71 per barrel.
On the other hand, gold assumed its more habitual trading pattern of rising in times of financial or economic uncertainty, taking back its title of a 'safe-haven' asset. The shiny metal headed for its largest one-day rise in nearly a month today after Greece warned it will miss deficit targets set to avoid bankruptcy. Gold prices for December jumped over 2% to an intraday high of $1667 per ounce.
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'Spread Betting Markets Cut Lossess on US Factory Activity Data', Article by IG Index, last update: 3-Oct-11
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