Global equity markets, crude oil and the euro fell yesterday on fears of a potential banking collapse in Cyprus and signs the economic downturn in Europe is deepening.
Several upbeat US economic reports on housing, future economic activity and business conditions in the mid-Atlantic region and improving Chinese factory output failed to lift inves-tor sentiment.
Prices of US Treasuries and German Bund futures rose as investors tried to gauge whether Cyprus would reach a deal to enable it to avoid default and a possible financial meltdown.
The benchmark 10-year US Treasury note was up 7/32 in price to yield 1.9337 per cent.
The European Central Bank gave Cyprus until Monday to raise billions of euros to clinch an international bailout or face losing emergency funds for its banks and inevitable collapse.
“The uncertainty within Cyprus has investors cycling into the risk-off trade,” said Chad Morganlander, a portfolio manager at Stifel, Nicolaus & Co in Florham Park, New Jersey.
Gold rallied to its highest in almost a month, with nervousness over Cyprus fuelling sentiment for the safe-haven metal. Spot gold prices rose $7.10 to $1,612.90 an ounce.
A severe earnings miss by Oracle Corp and a number of brokerages’ cutting their price targets on the tech icon pulled Nasdaq-listed stocks down. Oracle fell $8.29 to $32.80.
The Dow Jones industrial average was down 72.92 points, or 0.50 per cent, at 14,438.81. The Standard & Poor’s 500 Index was down 8.59 points, or 0.55 per cent, at 1,550.12.
The Nasdaq Composite Index was down 23.88 points, or 0.73 per cent, at 3,230.31.
European shares fell after Germany, the region’s leading economy, showed signs of fatigue and French businesses turned in their worst performance in four years in March. France, the eurozone’s second-biggest economy, likely fell into a recession.
The FTSEurofirst 300 index of top European shares closed down a preliminary 0.7 per cent at 1,190.72.
MSCI’s all-country world equity index fell 0.41 per cent to 358.19.
Crude oil was pushed lower by fears of further turmoil in the eurozone and by manufacturing data showing a deepening downturn in the currency bloc.
Brent crude for May delivery fell $1.21 to $107.51 a barrel. US crude for May was at $92.50, down $1.00.
The decline on Wall Street came even as more data showed a slow but steady US economic recovery. US home resales hit a three-year high and prices jumped in February, while factory activity in the US mid-Atlantic region grew in March after contracting for two months in a row.
Another report showed the Conference Board’s Leading Economic Index, a gauge of future US economic activity, rose for a third straight month in February.
The eurozone’s economic woes occurred even before Cyprus’s bailout troubles took centre stage.
“Maybe we were expecting it in France but the weakness in Germany was a surprise,” Antonio Garcia Pascual, chief southern European economist at Barclays, said of the two European mainstays’ performances.
Disappointing German data made investors already nervous about Cyprus’s debt crisis wary, though some analysts expected losses in equity markets to be short-lived.
Autos, sensitive to market sentiment, fell sharply, as did German synthetic-rubber maker Lanxess, which joined the list of auto suppliers to take a hit from anemic European car markets.