May 15, 2012 / 6:28 PM / 5 years ago

Euro hits 4-month low, world stocks drop on Greece turmoil

Traders work on the floor of the New York Stock Exchange, May 15, 2012.Brendan McDermid

NEW YORK (Reuters) - The euro fell to a four-month low against the dollar and global stocks dropped on Tuesday as Greece's decision to hold new elections added to uncertainty about its future and a possible exit from the euro zone.

Gold hit a 4-1/2-month low with the euro's retreat.

The political turmoil in Greece kept pressure on markets. Investors have been concerned that long-lasting problems in the euro zone and a likely recession will hit global growth.

Greek politicians again failed to agree on a new government, nine days after an inconclusive election. After Greece's president said the country will hold new elections, the euro slumped and investors fled to the safe-haven dollar.

"They are running out of money ahead of elections, so expect European leaders in the next few days to put enormous pressure on them to come up with a workable government along with some sort of extended schedule for the bailout," said Boris Schlossberg, director of FX Research at GFT in Jersey City, New Jersey.

The euro fell for the fifth of the last six sessions on chances left-wing politicians opposed to Greece's international bailout could win the June elections. A report showing the Greek economy slid deep in recession added to worries.

The euro last traded down 0.7 percent at $1.2732, with the session trough at $1.2720, the lowest since January 18.

The MSCI world equity index .MIWD00000PUS fell 0.8 percent, while the FTSE Eurofirst .FTEU3 index of top European shares ended down 0.7 percent.

Wall Street stocks fell for a third straight day on the shaky situation in Greece.

The Dow Jones industrial average .DJI fell 63.35 points, or 0.50 percent, to close at 12,632.00. The Standard & Poor's 500 Index .SPX was down 7.69 points, or 0.57 percent, at 1,330.66. The Nasdaq Composite Index .IXIC was down 8.82 points, or 0.30 percent, at 2,893.76.

Economic data on U.S. regional manufacturing and national homebuilder sentiment was positive, however. A gauge of homebuilder sentiment rose to the highest in five years this month.

Data also showed U.S. retail sales rose 0.1 percent in April, coming in under expectations.

Among gains, JPMorgan Chase & Co (JPM.N) shares rose 1.3 percent to $36.24 after falling more than 11 percent last week after the bank disclosed a trading loss of at least $2 billion. Pressure mounted on the bank to reclaim some of the millions of dollars it paid to the executives who oversaw the wrong-way trades.

On the down side were Chesapeake Energy Corp (CHK.N) shares, which fell as low as $14.31, their lowest since March 2009, after a credit rating downgrade and news that the natural gas producer will increase its borrowing to $4 billion from the planned $3 billion as it faces a liquidity crunch. Chesapeake shares finished the session down 5.6 percent at $14.65.

Germany kept hopes for growth alive when it reported that strong exports helped its economy grow 0.5 percent in the first three months of the year, ahead of market forecasts. Germany's performance offset zero growth in France and recession in Italy and Spain, leaving the whole 17-member euro zone economy stagnating but not in recession.

The upbeat German data helped support the price of Brent crude, which snapped three days of declines. In London, ICE Brent crude for June delivery settled at $112.24 a barrel, rising 67 cents, or 0.60 percent.

NYMEX crude for June delivery settled at $93.88 a barrel, down 80 cents, or 0.84 percent.

In the precious metals market, spot gold was off 0.88 percent at $1,542.60 an ounce and hit its lowest level since December 29 at $1,541.10 on heightened concerns over Europe's financial crisis.

"The euro has done very poorly against the dollar because of everything going on predominantly in Greece. Gold has gotten sold off quite hard in the last couple of sessions. I think people are unwinding and getting into cash and a little bit of Treasuries, German bunds, and that's about it," said Fred Schoenstein, metals trader at Heraeus in New York.

U.S. Treasuries prices eased as traders booked profits from an eight-week run-up primed by worries over the outcome of the European debt crisis.

The benchmark 10-year U.S. Treasury note was down 1/32, the yield at 1.7705 percent.

While U.S. yields rose slightly, benchmark rates remain below the technically important 1.8 percent level and not far off the seven-month low of 1.76 percent touched in overnight trade. Last week Treasuries yields fell for the eighth consecutive week.

0 : 0
  • narrow-browser-and-phone
  • medium-browser-and-portrait-tablet
  • landscape-tablet
  • medium-wide-browser
  • wide-browser-and-larger
  • medium-browser-and-landscape-tablet
  • medium-wide-browser-and-larger
  • above-phone
  • portrait-tablet-and-above
  • above-portrait-tablet
  • landscape-tablet-and-above
  • landscape-tablet-and-medium-wide-browser
  • portrait-tablet-and-below
  • landscape-tablet-and-below