Stimulus speculation and housing glut spark US falls: Morning market insights

The New York Stock Exchange fell overnight after the release of minutes from the Federal Reserve’s latest policy meeting, which dampened expectations of more stimulus money.

“A couple of members indicated that the initiation of additional stimulus could become necessary if the economy lost momentum or if inflation seemed likely to remain below 2%,” the minutes stated.

“I would have to see some pretty severe circumstances before I endorse for another round of quantitative easing,” Atlanta Federal Reserve president Dennis Lockhart told Bloomberg Radio. “The outlook is positive enough that I am not sure I see the need for it.”

Another reason behind the US fall overnight was the release of a Moody’s Analytics report stating up to 1.25 million repossessed houses and apartments could come onto the market, which could cause up to a 10% drop in prices.

The properties were held in reserve during a year-long probe into foreclosure practices.

“The longer a foreclosed home is in the mill, the bigger the losses,” says Todd Sherer, who manages distressed mortgage investments for Dalton Investments in Los Angeles. “We have a bulge of these properties coming through the system.”

The S&P500 Index was down 0.75% overnight or 10.57 points to 1419.04.

The Dow Jones Industrial Average was also down 0.49% or 64.94 points to 13199.50.

The NASDAQ Index fell 0.20% or 6.13 points to 3113.57.

Cisco Systems (CSCO: US) fell 1.75% to $US20.82 Cisco designs, manufactures and sells internet protocol networking and other IT products.

Walmart Stores (WMT: US) fell 1.16% to $60.65. Walmart is the world’s biggest retailer, with 8,500 outlets in 15 countries and more than 2 million employees.

West Texas Intermediate (WTI) oil gained 0.10% to $US104.11 a barrel overnight.

Gold was down 1.44% to be trading at $US1648.00 an ounce.

The Australian dollar was also down slightly overnight, buying $US1.0324 at 8.45am AEST.

Europe

European share markets were down overnight as Spanish bond yields rose. Spain’s government published its budget for 2012 last week citing big cuts to try and shore up its finances. Spain is seen to be Europe’s next big sovereign debt risk.

The London FTSE 100 fell 0.62% or 36.55 points to 5838.34.

The German DAX was down 1.05% or 74.37 points to 6982.28.

The European Stoxx50 index was also down 1.69% or 42.20 points to 2458.98.

In Frankfurt, German banks lead the falls with Commerzbank (CBK:GR) falling 3.19% to 1.851 euros and Deutsche Bank (DBK:GR) falling 2.86 % to 36.485 euros.