An improved outlook from the Federal Reserve and signs of improvement in housing cushioned the impact of weaker than expected GDP figures. However, Wall Street still closed lower Tuesday at the end of a volatile days trade.
The Fed increased its estimate for growth next year and cut its forecast for the unemployment rate. On the other side of the ledger, the Fed also lifted its estimate on the unemployment rate for 2011 and 2012.
In economic news, GDP grew at a slower pace than expected in the third quarter. GDP grew at a 2.8% annual rate, short of the 3.5% initially reported.
Meanwhile, according to an S&P/Case-Shiller study of the 20 largest metropolitan areas, house prices increased 3.1% in the third quarter.
Elsewhere, the Consumer Confidence index rose from 48.7 in October to a better than expected 49.5 in November.
The Dow Jones lost 17.24 points, or 0.16%, to 10,433.71, the S&P 500 weakened 0.59 points, or 0.05%, to 1,105.65 and the NASDAQ slid 6.83 points, or 0.31%, to 2,169.18.
Financials lost ground. JPMorgan, Citigroup and Bank of America shed 1.9%, 1.6% and 1.2%.
Morgan Stanley and Wells Fargo lost 1.5% and 0.8%.
Hewlett-Packard shed 1.6% after reporting quarterly earnings in line with forecasts after the close Monday.
Oracle shed 2%, while Apple, IBM and Microsoft dipped 0.7%, 0.2% and 0.1% respectively.
Telco’s AT&T and Verizon gained 1.2% and 1.7%.
Energy heavyweights Exxon Mobil, Chevron and ConocoPhillips rose between 0.4% and 0.6% despite NYMEX light crude oil for January delivery falling US$1.11 to settle at US$76.45 a barrel.
COMEX gold for December delivery rose US$1.90 to settle at a new record of US$1,166.60 an ounce.
European Markets
European shares retreated after the highest German business confidence in 15 months was outdone by a weaker than anticipated increase in U.S. consumer spending. Financials and miners led the market slide.
In economic news, the Ifo institute in Munich said its business climate index increased from 92 in October to a better than expected 93.9 in November.
The UK benchmark FTSE 100 lost 31.54 points, or 0.59% to 5,323.96. The French CAC40 shed 28.55 points, or 0.75% to 3,784.62, while the German DAX weakened 32.17 points, or 0.55% to 5,769.31.
Royal Bank of Scotland and Standard Chartered dropped 4% and 2.4% to lead the UK banks lower.
HSBC fell 1.9%, while Lloyds rose 2.6% as it revealed plans to raise capital through the UK’s largest ever rights offer. Shares will be sold at a 59.5% discount.
Commerzbank and Deutsche Bank shed 3.4% and 1.9% as Société Generale and BNP Paribas slid 3.2% and 2.6%.
Miners’ tracked commodity prices lower. Rio Tinto, Xstrata and Vedanta fell 2.9%, 1.6% and 2.7% respectively.
BHP Billiton shed 0.7%.
Energy stocks also retreated, with Royal Dutch Shell and BG Group down 0.8% and 0.4%.
Volkswagen slumped 5.6% after selling bonds in euros and Aussie dollars. The automaker’s Australian operation sold $125 million of three-year bonds.
Peugeot and Daimler lost 1.6% and 0.6%, while Renault added 0.2%.
Carrefour gained 3.1% following a broker upgrade on the French retailer. Metro dipped 1.4% on reports its Real superstores will not meet profitability targets this year.
Japanese Markets
Japan’s Nikkei fell to its lowest close in four months as concerns increased that more banks will require to tap the market for further capital. A stronger yen negatively impacted exporters.
The Nikkei 225 dropped 96.10, or 1.01% to 9,401.58.
Mitsubishi UFJ Financial Group, Sumitomo Mitsui Financial Group and Mizuho Financial Group lost 2.8%, 4.4% and 2.5% respectively. Resona fell 6%.
Japan Airlines sank 8.4% on concerns it is heading for bankruptcy. Mitsui & Co sold its interest in the carrier.
Takefuji Corp dropped 6.8% on the back of downgrade by ratings agency Moody’s.
Mitsui Chemicals slumped 10% ahead of news shares that were sold in a capital raising priced for the first time.
A fall in the Baltic Dry Index sent shipping stocks lower. Mitsui O.S.K. Lines and Nippon Yusen K.K. lost 2.5% and 2.4%.
Hong Kong Market
Hong Kong markets fell to three-week lows Tuesday, as investors continued to book profits on an index which has doubled in value in 8 months. Meanwhile banks lost ground on fears they would dilute shareholder value with a fresh capital raising.
The Hang Seng shed 348.25, or 1.53% to 22,423.14.
HSBC lost 0.6%, while ICBC retreated 1.7%.
Bank of China slumped 4%, while Bank of Communications sank 2.5%.
Consumer focused stock Li & Fung retreated 0.8%.
The steel makers showed strength with Angang Steel, China’s number one steel maker advanced 2.7%. Rival Maanshan Iron & Steel Co., rose 2.3%.
China Agri-Industries was the day’s big winner with an upgrade to buy from Goldman Sachs seeing that stock surge 9.7%.
