By Rita Nazareth - Nov 3, 2011 9:18 PM GMT+0700
Nov. 3 (Bloomberg) -- Chris Rupkey, chief financial economist at Bank of Tokyo-Mitsubishi UFJ, talks about the decision by Federal Reserve policy makers to refrain from taking any additional steps to ease monetary policy. He speaks from New York with Susan Li on Bloomberg Television's "First Up." (Source: Bloomberg)
Nov. 3 (Bloomberg) -- Erik Ristuben, New York-based chief investment officer at Russell Investments, talks about the impact of Europe's debt crisis on the U.S. economy and financial markets. Ristuben speaks with Susan Li on Bloomberg Television's "First Up." (Source: Bloomberg)
U.S. stocks pared gains after a report showed American service industries expanded at a slower pace than forecast and the president of the European Central Bank predicted a mild recession for the region.
Jefferies Group Inc. (JEF) plunged as much as 20 percent, triggering a stock exchange circuit breaker, after Egan-Jones Ratings Co. cut its credit rating. A gauge of retailers in the Standard & Poor’s 500 Index fell 1.6 percent.
The S&P 500 added 0.1 percent to 1,239.20 at 10:12 a.m. in New York. The Dow Jones Industrial Average rose 39.54 points, or 0.3 percent, to 11,875.58. Stocks rallied earlier as the ECB unexpectedly cut interest rates and European leaders increased pressure on Greece to accept a bailout.
"There are lots of uncertainties out there," Chad Morganlander, a Florham Park, New Jersey-based money manager at Stifel Nicolaus & Co., which oversees more than $116 billion in client assets, said in a telephone interview. "We’re in a glacial global growth period and as austerity hits Europe, GDP expectations will be revised lower. In the U.S., we continue to see lackluster improvement."
Equities rose yesterday as the Federal Reserve said it is prepared to take action if needed to safeguard the recovery. Stocks fell earlier this week as Greek Prime Minister George Papandreou announced on Oct. 31 a parliamentary confidence vote and his desire to hold a referendum on the rescue pact.
ECB Move
Stocks erased gains after the Institute for Supply Management’s index of non-manufacturing businesses eased to 52.9 in October from 53 a month earlier. A reading above 50 signals expansion. The measure was projected to climb to 53.5, according to the median forecast in a Bloomberg News survey. Estimates from 77 economists surveyed ranged from 52 to 55.
The ECB unexpectedly cut interest rates at President Mario Draghi’s first meeting in charge after euro-area leaders raised the prospect of Greece exiting the monetary union, sending bond yields soaring in Italy and Spain. ECB officials lowered the benchmark interest rate by 25 basis points to 1.25 percent.
“What we are observing now is slow growth, heading towards a mild recession by year end,” Draghi said in answer to questions at a press conference in Frankfurt.
European leaders for the first time raised the prospect of the euro area splintering, forcing debt-stricken Greece to decide whether it’s in or out when it holds a referendum on a bailout package next month. German and French leaders holding emergency talks on the eve of a Group of 20 summit today in Cannes, France, withheld 8 billion euros ($11 billion) of assistance.
Coalition Government
Earlier today, stocks rose after BBC reported that Papandreou would step down and propose a coalition government headed by former European Central Bank vice-president Lucas Papademos, without saying how it got the information. Later, two officials with the ruling Pasok party said Papandreou won’t resign his post and plans to speak in Parliament in Athens today as scheduled.
“They’re pushing the Greeks to the wall,” Peter Sorrentino, a senior fund manager at Huntington Asset Advisors in Cincinnati, which oversees $14.5 billion of assets, said in a telephone interview. “Either they are in this and make it happen or they get tossed out of the euro zone. It’s a sobering up moment. On top of that, the ECB’s decision to cut rates will take some of the pressure off of the upcoming financing for the Spanish and Italian markets.”
To contact the reporter on this story: Rita Nazareth in New York at rnazareth@bloomberg.net
To contact the editor responsible for this story: Nick Baker at nbaker7@bloomberg.net
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