North American stocks were mixed on Monday, as upbeat weekend election results in Greece weighed against surging bond yields in Spain and Italy – confirming that the euro zone’s debt crisis is far from over.
The Dow Jones industrial average closed at 12,741.82, down 25.35 points or 0.2 per cent. The broader S&P 500 closed at 1344.78, up 1.94 points or 0.1 per cent. In Canada, the S&P/TSX composite index closed at 11,601.13, up 76.23 points or 0.7 per cent.
Greek election results same as a relief, when the pro-austerity, pro-bailout New Democracy party emerged with the biggest share of votes – marking a significant step toward keeping the ailing country away from a messy exit from the euro zone.
However, the relief was brief: Spanish 10-year government bond yields leapt to a new euro-era high of nearly 7.1 per cent, up a sharp 27 basis points (there are 100 basis points in a percentage point). Italian yields also rose, with the 10-year government bond moving above 6 per cent. Both cases reflect unsustainable borrowing costs, meaning that the euro zone’s sovereign debt crisis remains a threat.
The G20 meeting of world leaders, which began on Monday in Mexico, is expected to highlight the ongoing crisis and what countries – Germany, in particular – can do about it.
However, investors might be more focused on the U.S. Federal Reserve, which begins its two-day monetary policy meeting on Tuesday, culminating on Wednesday with the release of a policy statement. With economic conditions in the United States and Europe deteriorating, many observers are hopeful that the Fed will signal some kind of stimulus ahead.
Meanwhile, the National Association of Homebuilders’ housing index for June rose to 29, up one point and suggesting slightly rising confidence and activity among home builders. The market took it as good news: The S&P 500’s homebuilding index rose 3.9 per cent.
Elsewhere, Microsoft Corp. fell 0.6 per cent, ahead of a mysterious event in Los Angeles, where speculation pointed to the software giant making a big foray into hardware by producing a tablet computer to rival Apple Inc.’s iPad. Apple rose 2.0 per cent.
Fairfax Financial Holdings Ltd. was relatively unchanged after it said it would buy Brit Insurance Ltd. of London in a $300-million (U.S.) deal.