Spanish Credit Rating Cut, European Stock Markets Retreat

Spain saw their credit rating dropped yet again on Wednesday. Due to concern over changes to the nation’s budget and reform, Standard & Poor’s cut Spain’s credit rating by two notches. It is now at a triple B minus. The country now has a negative outlook according to S & P. Earnings for 10-year government bonds were at 5.76 percent on Wednesday following the announcement of a 500 billion euro rescue fund earlier in the week.
Spain, like many European nations, is dealing with a continuously high unemployment rate. The nation currently unemployment rate is currently at 24.6 percent. Once the news came out, the euro dropped 0.1 percent and European stock markets fell for the third day in a row. The International Monetary Fund recently warned the world about the impact of the ongoing debt-crisis in Europe.
Falling Stock Markets in Europe
The Stoxx Europe 600 Index dropped 0.6 percent on Wednesday to finish at 268.71. Lowered expectations for the Eurozone’s economy were fueled by a failed proposal of a merger in the aerospace sector. Shares of BAE dropped 1.4 percent in London while EADS rose 5.29 percent.  The two defense firms were expected to conclude a 45 billion dollar merger. Government opposition to the plan caused merger discussions to eventually break down.  Positive news came out of the United Kingdom where bank stocks rose after eased capital rules.
In the United Kingdom, the Financial Services Authority chose to ease capital rules in an attempt to boost lending. As a result, the Royal Bank of Scotland gained 2.1 percent while Lloyd’s Banking group rose 4 percent. In Luxembourg, finance ministers for the Eurozone finished a two-day meeting on Tuesday night. The finance ministers decided to create a permanent 500 billion dollar rescue fund for Eurozone nations. Portugal was given until 2014 to reach its budgetary goals. Despite this news, Portugal’s PSI 20 index fell one percent to end at 5310.47.
With the continued uncertainty in other Eurozone nations, German bonds dropped to an average yield of 0.53 percent from their former levels of 0.61 percent. The German government sold off a total of 3.112 billion euros in bonds. Unlike the bond market, stocks in Germany fell as an impending strike for October 18 reached the end of the planning stages. Germans in the public sector and private sector are planning on striking on October 18 for more austerity measures. Germany’s DAX retreated 0.4 percent to 7205.23.
In France, the CAC 40 dropped 0.5 percent to 3365.87 while Madrid’s IBEX 35 index fell one percent to 7668.00. The Milan MIB index retreated 0.4 percent to 15440.63. The United Kingdom’s FTSE 100 also dropped 0.6 percent to 5776.71. In Spain, shares of the Banco Popular Español fell 4.5 percent. Shares of the Banca Monte dei Paschi di Siena in Italy dropped 3.8 percent.
Crude oil scheduled for November delivery rose 0.4 percent to $92.73 a barrel. At the same time, gold that is scheduled for December delivery dropped 0.1 percent on the Comex division of New York’s Mercantile Exchange. Gold was last at $1,761.20 per ounce.
United States Stocks Fall
The Standard & Poor’s 500 index posted its lowest levels for a month on Wednesday. This drop came as Alcoa released lowered earnings forecasts and other corporations joined the fray. The largest aluminum producer in the United States, Alcoa, fell 4.6 percent as global demand for aluminum dropped. Other stocks that fell include shares of the Chevron Corporation. After statements of lower third-quarter earnings, shares of the Chevron Corporation slid 4.2 percent. Throughout the day, the S& P 500 slipped a total of 0.6 percent to 1,432.56 in New York City. On Tuesday, the benchmark gauge has retreated one percent. It has decreased by two percent over the last four days. At the same time, the Dow Jones Industrial Average fell one percent, or 128.56 points, to 13,344.97. Overall, there were 5.9 billion shares traded on United States-based stock markets today which is a level that is 1.5 percent lower than the three-month average.
Positive news came from Wal-Mart Stores Incorporated. This retailer kept pace with consumer stock and reported an exceptionally strong back-to-school season. It plans on adding more United States stores. Following this announcement, Wal-Mart Stores Incorporated gained to a record price. Yum! Brans Incorporated also gained eight percent following higher-than-expected profits for the third quarter.
Global Outlook
In China, car sales unexpectedly fell this quarter for the first time in more than eight months. At the same time, the International Monetary Fund warned Eurozone-based banks to shrink their assets. If policy makers cannot reach a bailout resolution, it will be up to the banks to mitigate any repercussions. Spanish Prime Minister Mariano Rajoy and French President Hollande called on other European Nations to stick to the commitments they made at June’s European Council.
The United States Federal Reserve released its Beige Book and warned of a modest expansion this month for the marketplace. The S&P 500 index briefly gained after this release before continuing its four-day retreat. Overall, the S&P has risen 12 percent from its June 1st low.
Individual Stocks
The Morgan Stanley Cyclical Index dropped 0.8 percent for the third day in a row. Overall, nine out of ten groups on the S&P 500 index dropped with energy companies posting the largest decline. In particular, Tesoro Corporation retreated 5.6 percent to $38.70.
The largest tax preparer in the United States, H&R Block fell 5.4 percent to $16.67. In an attempt to return to its former highs, H&R Block reported that it was preparing to hire Goldman Sachs Group to find different alternatives. Based in Kansas City, Missouri, H&R Block is debating the wisdom of dropping its title as a savings and loan holding company.
Monster Beverage Corporation was another loser on Wednesday stock market. The largest energy drink producer in the United States, Monster Beverage, reported declining profits. As a result, shares of stock in the Monster Beverage Corporation fell 5.5 percent to end at a level of $53.63. 
About the Author
Marcus Holland is editor of the websites and He holds an Honors degree in Business and Finance and regularly contributes to various financial websites.

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