The euro fell against the dollar after a continuous rally in the last week, after investors moved towards safe haven assets on hearing news about Egypt's unrest. The yen however gained against most currencies as investors trusted investing in it after S&P downgraded Japan's credit rating. Jens Nordig, a managing director of currency research in New York at Nomura Holdings Inc, said: “I don’t think when we said the fallout from the downgrade would be temporary we were thinking it would be six hours. We have risk aversion that is affecting the market, and it is dragging down global yields. The yen always gains when global yields go lower."
Stocks of Nikkei and Hang Seng continued their fall, after Japan's credit downgrade and China's property tax news, along with CNOOC's, oil and gas producers pulled out energy counters.Christian Keilland, head of trading at BTIG in Hong Kong, said: “Overhang is the new buzzword. There's an overhang in everything
with inflation, property taxes and local government debt and there's just not a lot of conviction in the market right now."On Japan's downgrading by S&P, stating that the government does not have a plan to tackle ongoing debt, Norihiro Fujito, a senior investment strategist at Mitsubishi UFJ MOrgan Stanley Securities, said: "The rating reflects the country's current fiscal position. Therefore funds that have been overweight on japan since last November may reconsider their positions."
It was a worry filled day for European investors, as shares tumbled as political unrest escalated in Egypt, and the rise in US consumer spending was not enough to keep markets up as overall GDP figures were not good.Heino Ruland, strategist at Ruland Research in Frankfurt, said: “Consumer spending was good in the GDP data, but unless the overall growth figure is above expectations it is not going to get the market moving.”
US markets suffered losses, especially the DOW, after riots hit Egypt prompting investors to stay away from risky stocks. Thomas Nyheim, portfolio manager for Christiana Bank & Trust Co in Greenville,Delaware, said: “The market hates uncertainties, especially geopolitical ones, and based on how that shapes up throughout the weekend (in Egypt), next week's trading will be impacted."The Dow Jones Industrial Average lost 48.14 points or 0.4 percent to 11,989.83 . The Standard & Poor's 500 fell 0.6 percent to 1,276.34. The Nasdaq Composite Index also fell.
Oil rose the most as investors grew concerned as Egypt faces protests, keeping investors speculation on high that the protests may spread to other oil producing countries in the Middle East. John Kilduff, a partner at Again Capital LLC, a New York-based hedge fund, said: “If this can happen in Egypt, there is no reason that it can’t occur in Libya or Saudi Arabia.”Oil for for March delivery rose $3.70 to settle at $89.34 a barrel.
Gold continued its gains,as investors bought gold heavily on its safe haven quality as investor's feared Egypt's unrest may spread across the Middle East. Dennis Gartman, publisher of the Gartman Letter, a daily investment commentary, said: “Confusion breeds contempt for all investments other than gold.Clearly, money is flowing to gold as the ultimate safe haven ... because nobody knows how this situation is going to resolve itself."US Gold futures for February delivery settled up $22.3 at $1,340.70 an ounce.
Bonds in the US fell after a soon to be coming report may show quicker economic growth, as investors may demand more compensation for potential inflation. Mohit Kumar, a fixed-income strategist at Deutsche Bank AG in London, said: “Yields should be heading higher. The deficit consolidation isn’t really happening and that needs to feed in, and inflation has bottomed out and is going to start moving up.”Yields on 10-year notes rose two basis points to 3.41 percent.
In Germany too yields rose, expect for the Ten Year bonds, as speculation was high that the European Central Bank may take action to control inflation, ECB's President Jean-Claude Trichet told policymakers in a meeting on January 26th. Patrick Jacq, a senior fixed-income strategist at BNP Paribas SA in Paris,said: “The increase in the German note yield was driven by fears of tighter monetary policy. This is clear when you look at the evolution of the curve. We have hawkish rhetoric coming in from the ECB so it makes sense to be short at the short end.”Ten-year german bonds were two basis points lower and settled at 3.16 percent.

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