February 26, 2014 / 6:45 PM / 3 years ago

GLOBAL MARKETS-World stocks dip, but Wall St up; ruble at 5-yr low

6 Min Read

* European shares close lower as luxury goods makers slide
    * S&P 500 above record closing high; retailers strong
    * China's yuan steady after Tuesday's slide
    * Ruble hits five-year low on Ukraine fallout
    * Gold touches four-month peak
    * Fed Chair Yellen to testify to Senate on Thursday


    By Chuck Mikolajczak
    NEW YORK, Feb 26 (Reuters) - World stocks markets edged
lower on Wednesday, stung by growing worries over some emerging
markets grew as escalating tensions in the Ukraine sent the
Russian ruble to a five-year low, while equities on Wall Street
rose.
    The drop in the ruble came a day after China's yuan had its
biggest drop in three years, which weighed on shares of European
luxury goods makers because of their heavy exposure to emerging
markets.
    The S&P 500 was on track to break its record closing high of
1,848.38 set on Jan. 15, as data showing that sales of new U.S.
single-family homes surged to a 5-1/2-year high in January eased
concerns about a slowing of economic momentum. The upbeat data
was welcome after a string of soft economic releases, although
investors have shown a willingness of late to forgive
disappointing data due to harsh winter weather. 
    "The new-home sales did give us reason for some optimism
today, although it does look like sort of an anomalous data
point, especially given it was up so strongly in the East," said
Kim Forrest, senior equity research analyst at Fort Pitt Capital
Group in Pittsburgh. 
    "The market has really wanted to overlook any sort of
negative news and it continues that pattern."
    The ruble slid as tensions escalated in Ukraine, after
Russian President Vladimir Putin ordered drills by his armed
forces to test combat readiness in western Russia, near the
border with Ukraine. 
    The threat of debt default by Ukraine also increased. Russia
holds $3 billion worth of Ukrainian debt issued last December,
which could end up in default if certain terms are breached.
    Ukraine has asked the International Monetary Fund to help
prepare a new financial aid program, while the country's central
bank chairman said the new government would soon have its own
anti-crisis program ready.  
    The ruble was at 36.025 to the dollar, after touching
its lowest level since March 2009. Ukraine's hryvnia hit
a record low of 10 per dollar.
    The market moves come as some investors have already been
pulling money out of emerging markets and putting it back into
better-understood developed economies.
    Chinese shares and the yuan  stabilized after
sharp falls on Tuesday, although dealers suspect the People's
Bank of China was maintaining a gradual squeeze on the yuan
, to inject more two-way volatility into the market
and wrong-foot speculators betting it would keep rising.
    The country's foreign exchange regulator said a dip in the
yuan is normal as some investors unwind their long bets on the
currency, helping inject two-way exchange rate volatility over
time. 
  
    On Wall Street, retailers contributed to gains for a second
straight session, with the S&P retail index up 2.7
percent. 
    Shares of Lowe's Cos Inc, the No. 2 U.S. home
improvement retailer, jumped 6.47 percent to $51.21 after the
company reported strong growth in quarterly sales, showing that
it was narrowing the gap with market leader Home Depot Inc
. 
    Target Corp shares climbed to an almost six-week
high after the company reassured investors that customers were
beginning to return to its U.S. stores, suggesting that the
lingering impact of a data breach that affected millions of
shoppers may not be as bad as some had feared. Shares of Target
jumped 7.6 percent to $60.79. 
    The Dow Jones industrial average rose 43.19 points or
0.27 percent, to 16,222.85, the S&P 500 gained 5 points
or 0.27 percent, to 1,850.12 and the Nasdaq Composite 
added 23.303 points or 0.54 percent, to 4,310.89.
    Gains on Wall Street were held in check ahead of testimony
by Federal Reserve Chair Janet Yellen before the U.S. Senate on
Thursday. She is likely to get questions on the recent spate of
soft U.S. economic news and what it might mean for policy.    
    The MSCI world equity index, which tracks
shares in 45 nations, fell 0.53 point or 0.13 percent, to
407.82. 
    The pan-European FTSEurofirst 300 closed down 0.2
percent at 1,348.75 points, weighed down by declines in luxury
goods makers. 
    Shares of LVMH finished down 1.6 percent, Kering
 fell 2.2 percent, and Hermes was down 0.2
percent. The weakness was attributed to a note from Credit
Suisse analysts who downgraded the sector to "benchmark" from
"overweight," citing the sector's big exposure to China and
other emerging markets.
    Credit Suisse was also in the spotlight, down 0.7
percent as a U.S. Senate subcommittee alleged new misdeeds by
the Swiss lender. 
    The dollar rose to its highest level in two weeks against a
basket of major currencies as investors sought safety on the
geopolitical tensions in Russia and Ukraine. 
    The dollar index rose 0.5 percent to 80.503 after
hitting a high of 80.524, it strongest level since February 13.
    The euro fell against the dollar, which was
down 0.53 percent at $1.3672. Against the yen, the dollar was up
0.32 percent at 102.55.
    Yields on 10-year U.S. Treasury notes inched down to 2.688
 percent.
    Gold retreated after earlier on Wednesday hitting four-month
highs as the dollar firmed, but was still seen benefiting from
uncertainty over China's economic policies and worries about the
U.S. recovery in the short term. Spot gold touched its
highest level since Oct. 30, at $1,345.35 an ounce, before
falling 0.9 percent at $1,327.56.10.

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