Greek downgrade weighs on world shares

The New York Stock Exchange building. Photo / Thinkstock

Stocks on Wall Street started the day on a positive note, before giving up gains as a drop in oil prices and a downgrade of Greece's credit rating hurt investors' confidence.

Later in the day, cautious positive sentiment took over again. In afternoon trading, the Dow Jones Industrial Average was 0.27 per cent stronger, while the Standard & Poor's 500 Index was up 0.28 per cent and the Nasdaq Composite Index traded 0.19 per cent higher.

"Markets are trading with two parts indifference, one part fear and five parts of lack of catalyst," Larry Peruzzi, senior equity trader at Cabrera Capital Markets in Boston, told Reuters. "Right now there just does not seem to be enough drivers to attract money into this market."

Among the bright spots today, Transatlantic Holdings, formerly owned by American International Group, jumped 10 per cent after agreeing to merge with Allied World Assurance Company Holdings of Switzerland.

In another sign of optimism, Facebook was preparing to file for an initial public offering as early as October or November that could value the popular social networking site at more than US$100 billion, financial news channel CNBC reported on Monday.

Goldman Sachs was leading the chase to manage the offering, which could come in the first quarter of 2012, CNBC said. Facebook, whose chief operating officer last month called an IPO "inevitable," declined to comment, according to Reuters.

A drop in commodity prices including oil and gold hurt stocks such as Halliburton and Freeport-McMoRan Copper & Gold.

Brent crude for July delivery fell 88 cents to US$117.90 a barrel by 1736 GMT, while US July crude fell US$2.63 to US$96.66 barrel.

Spot gold dropped US $6.55 to US$1,524.84 an ounce by 5:39 a.m. EDT.

"Currencies remain relatively volatile and will be the driver in the near term for gold and silver. The outlook for the currencies will have a significant bearing on where the next move is," RBS analyst Daniel Major told Reuters.

The euro fell to a record low against the Swiss franc as Standard & Poor's Ratings Services cut its long-term sovereign credit ratings on Greece and put the outlook at negative.

The euro sank as low as 1.2004 Swiss francs on trading platform EBS.

"The Swiss franc is the currency to be in right now," Greg Salvaggio, vice president of trading at Tempus Consulting in Washington, told Reuters.

The euro last traded 0.2 per cent higher at US$1.4373, erasing earlier losses, while the US dollar was 0.35 per cent weaker against a basket of major currencies.

European Central Bank president Jean-Claude Trichet said today that the central bank needed to ensure that recent oil and commodity price rises did not trigger inflationary problems. His comments came days after the ECB suggested it would raise interest rates next month.

New York University professor Nouriel Roubini told Reuters in a June 11 interview in Singapore that a "perfect storm" of fiscal woe in the US., a slowdown in China, European debt restructuring and stagnation in Japan might converge on the global economy.

There was a one-in-three chance the factors would combine to stunt growth from 2013, said Roubini who was among analysts who predicted the global financial crisis of 2007-2009.