Equity markets sank on Wednesday as sovereign debt concerns weighed on shares after Portugal’s debt rating was cut on deficit concerns. Portugal’s rating was lowered to AA- as Fitch Ratings cited that the Portuguese government would have to enact harsh austerity measures in order to get the country’s deficit within 3% of GDP by the end of 2013.”The fear is that these issues spread from Portugal and Greece to other countries in the region,” said Alan Lancz, president of an investment advisory firm in Toledo, Ohio. “There aren’t any catalysts to keep us higher after the recent gains we’ve had, and investors are asking what’s the next shoe to drop? What’s the next country to fall?” Meanwhile, commodities weakened as the dollar strengthened on the euro zone worries; oil finished the day lower by close to 2%.
The ETFdb 60 lost 8.51 points to close at 1,045.35.
Among the biggest losers on the day was the precious metals sector, with Market Vectors TR Gold Miners Fund (GDX) sinking close to 4%. This came after gold futures fell to a six-week low as the dollar strengthened by over 1% against the euro, sending investors to the relative security of the U.S. dollar. The dollar was further boosted by a rise in durable goods orders for the third straight month in February. Both developments sunk commodities and sent gold miners plunging. Barrick Gold, the largest component of GDX, was down over 4% in Wednesday trading.
Gainers were few and far between as fear returned to the market. One of the few gainers was iPath S&P 500 VIX Short-Term Futures ETN (VXX) which finally ended its slump and finished the day up 2.5%. VXX was one of the primary beneficiaries of the increased worries in Europe as investors saw volatility return to the market place due to uncertainty regarding the euro zone’s plan to deal with free-spending members.
Disclosure: No positions at time of writing.