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EU crisis meeting fails to boost confidence


10:26, December 13, 2011

NEW YORK, Dec.12 (Xinhua) -- U.S. stocks pulled back across the board on Monday as the latest EU summit failed to boost confidence.

The Dow Jones industrial average dropped 162.87 points, or 1.34 percent, to 12,021.39. The Standard & Poor's 500 fell 18.72 points, or 1.49 percent, to 1,236.47. The Nasdaq Composite Index lost 34. 59 points, or 1.31 percent, to 2,612.26.

The decline came after Friday's rally as 17 eurozone members plus up to nine non-eurozone EU states basically agreed to join the compact based on "inter-governmental treaties" to take unprecedented measures to oversee national economies, with sanctions for governments that run up high deficits.

Under the deal, nations will make a constitutional commitment to balanced budgets with a structural deficit of less than 0.5 percent of gross domestic product. Meanwhile, the leaders also agreed to bring forward by a year the creation of 500 billion euro European Stability Mechanism so it should be ready by July 2012.

What's more, the leaders agreed to increase the resources of the International Monetary Fund by 200 billion euro in bilateral loans to ensure it has enough resources to intervene again in the euro crisis if needed.

However, the euphoria faded after a weekend and investor began to worry the compact was far from enough to curb the region's debt crisis, especially after rating agencies warned that the summit did nothing to ease the pressure on the eurozone sovereign debt.

Fitch Ratings said the summit demonstrated strong political support for the euro, but "did little" to ease pressures on eurozone sovereign debt.

"It seems that a 'comprehensive solution' to the current crisis is not on offer," said the agency. "It means the crisis will continue at varying levels of intensity throughout 2012 and probably beyond, until the region is able to sustain broad economic recovery."

Meanwhile, Moody's Investors Service said the summit "offers few new measures" and did not change its view that the risks to the cohesion of the euro area continue to rise.

Stocks also got a hit after chip giant Intel reduced its gross margins guidance for the fourth quarter, saying a shortage of hard- disk drives is cutting customers' production of personal computers.

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