Posted on June - 22 - 2011

Markets May React To Eurogroup’s Reluctance To Support Greece

– The major U.S. index futures are pointing to a lower opening on Monday, with sentiment being weighed down by the uncertainty surrounding the fate of Greek. With the Eurogroup officials saying no to immediately extending financial assistance to the beleaguered nation until it shows determination in improving its fiscal situation. Added to this nervous, economic data points released from Japan and China suggested softness. In reaction to these developments, risk aversion has been on the rise, sending commodities and risky currencies lower.

U.S. stocks closed the week ended June 17th on a mixed note, extending the lean patch for in recent weeks. The Euro zone debt worries, which worsened as the possibility of Greece defaulting on its debt increased, and a spate of weak manufacturing readings kept sentiment subdued. Technology and commodities stocks were the worst hit during the week.

Last Monday, stocks closed mixed despite several deal announcements, as the news of S&P downgrading Greece’s debt rating created anxiety among traders. A better than expected U.S. retail sales report catalyzed a wave of bargain hunting on Tuesday, as the major averages raced to a solid start and subsequently held the gains until the close, ending notably higher.

Hit by the double whammy of the Euro debt crisis and markedly bleak manufacturing data, stocks retreated sharply on Wednesday. The major averages scrambled to a mixed close on Thursday against the backdrop of the euro zone debt concerns and mixed economic data released during the day. Stocks had a mixed outing yet again on Friday, as the weakness engendered by a warning by Research In Motion (RIMM) and fundamental concerns were mitigated to some extent by positive developments on the Greek debt front.

For the week, the Dow Industrials added 0.44 percent compared to a more modest 0.04 percent advance by the S&P 500 Index, while the Nasdaq Composite Index receded 1.03 percent.

Among the sector indexes, the NYSE Arca Airline Index added 2.31 percent for the week, while the Dow Jones Transportation Average, the S&P Retail Index and the KBW Bank Index added about 1 percent each. Meanwhile, the Philadelphia Semiconductor Index fell 3.62 percent and the Philadelphia Oil Service Index and the NYSE Arca Gold Bugs Index lost over 2 percent each.

Currency, Commodity Markets

Crude oil futures are receding $1.02 to $91.99 a barrel after declining $6.28 or 6.32 percent to $93.01 a barrel in the week ended June 17th.

Last Monday, oil declined sharply, slipping by about $2-a-barrel amid an increase in risk aversion. However, the commodity rebounded by over $2-a-barrel on Tuesday, as the equity markets rallied.

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