Housing Data Sent Bulls Running for Cover
The release of the existing home sales sent the shares south as economic prospects grew even dimmer in US. In July, sales dropped 27.2% to 3.83 million from 5.26 million in prior month. Last year the existing home sales amounted to 5.14 million. The figure was worse than consensus which had forecast a drop to 4.7 million. Expiry of government incentive in the form of tax credit was cited to be taking the steam off the housing market.
Shares in Germany mostly fell as DAX index retreated deep into the red at 5,935.44 or down 1.3%, while in London FTSE index shed 1.5% to end at 5,155.95.
Economic data coming from Germany reaffirmed that the Europe’s biggest economy grew 2.2% in 2Q10. Exports increased 8.2% and imports rose 7%, underlining the significance of overseas markets to German economy. Domestically, consumer spending was reportedly up 0.6%, construction spending also jumped 5.2%, while government spending increased 0.4%.
The bigger news came from S&P who downgraded Ireland’s credit rating on late Tuesday. Long-term sovereign rating was downgraded to AA- from AA due to high cost to prop up its financial sector, with the outlook set to negative.
HSBC, who in a process of acquiring Nedbank, has been downgraded to SELL from NEUTRAL at Miller Tabak. HSBC fell 1.45% at 629.90 pence.
Most stocks ended up in red in London, with BP dropped 3.35% to 377.50 pence, Barclays slipped 3.16%, and GSK at 1,200 pence by the end of the day. Marks & Spencer bucked the trend as it gained 0.42%. In Frankfurt, Commerzbank shed 2.5%, ThyssenKrupp retreated 2.43%, and insurer Allianz closed the day at €80.71, down 2.17%.
Across the Atlantic, American shares bled again as existing home sales sent DJIA 133.96 points down to 10,040.45, Nasdaq Composite to 2,123.76 or down 1.66%, and S&P Index to 1,051.87 or falling 15.49 points. The Dow briefly pierced the 10k level before the index later recovered.
On the corporate front, HP announced a technology services contract with Alabama Medicaid Agency worth $135 million. HP also had its bid worth $1.6 billion for 3Par ready to be counter-offered by Dell as Dell prepares its new bid. Both company ended down on Tuesday, with Dell down 2.97% to $11.53 and HP down 1.66% to $38.39.
J&J has been warned by the FDA regarding its hip implant sale for unapproved uses and also on another case of the marketing of an unapproved high tech system to guide doctors in knee replacements implants. J&J fell to $58.01 or down 1.46%.
3M is seen bearish by JP Morgan as the company is likely to have some hard time delivering profit and revenue growth that match up to the investors’ expectations. Its rating has been downgraded to UNDERWEIGHT from NEUTRAL.
Wrapping up the market, Boeing tanked 3.74%, Starbucks fell 3.63%, while Ford Motor skid 3.17%.On the positive side, AT&T gained 0.87%, Adobe was up 0.4%, and Wal Mart edged 0.31% higher.
On Wednesday the markets will again brace for another possible slap from new home sales figure in July. The consensus saw an increase from 330,000 to 339,000. The other data, the durable goods orders are seen rising in July by 2.7%, reversing the 1% fall in June.
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