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US markets down, European stocks up

22 January 2010 09:13 (UTC +04:00)

Baku- APA-Economics. European stocks were higher Thursday, recouping some of the losses seen in the previous session, supported by late recoveries on Wall Street and in Asia, Dow Jones Newswires reported.
However, concerns about growth and inflation in China remained. "While the gross domestic product and industrial production numbers from China were strong, they were both in line with expectations. However, the consumer price index and producer price index overshot, and this has traders concerned that further tightening [of monetary policy] is on the way, " said David Morrison at GFT.
By 0850 GMT, the pan-European Stoxx 600 index was up 0.2% at 256.89, while London’s FTSE 100 index had gained 0.5% to 5446.92. Frankfurt’s DAX index was up 0.3% at 5868.53 and the CAC-40 index in Paris was 0.5% higher at 3949.39.
Bucking the trend, Bayer (BAYN.XE) fell 1.5% after Morgan Stanley downgraded the stock to underweight from overweight, saying it sees increasing competitive risk.
Looking ahead, U.S. earnings releases are likely to take center stage again, with Goldman Sachs (GS), American Express (AXP) and Google (GOOG) all scheduled to report. "Results from Goldman will give traders further insight into the strength of the global recovery in the banking arena, but earnings from American Express and Google may give us more of an idea about levels of consumer confidence," said Owen Ireland at ODL Securities.
On the economic calendar, highlights include the U.K. public finance data at 0930 GMT and the CBI industrial trends survey at 1100 GMT. In the U.S., weekly jobless claims and the Philadelphia Fed manufacturing index are due at 1330 GMT and 1500 GMT respectively.
On Wall Street Wednesday, stocks fell broadly in early business as worries over monetary tightening in China weighed on the shares of commodity-related companies including Alcoa and Chevron, while investors were disappointed with the 2010 earnings forecast from International Business Machines.
The Dow Jones Industrial Average fell 122.28 points, or 1.1%, to 10,603.15, marking its biggest one-day drop so far this year. IBM was its worst performer, off $3.89, or 2.9%, at $130.25. The tech giant’s fourth-quarter profit rose 8.7% as margins improved and revenue inched up. However, its profit outlook for 2010 implied year-over-year growth of 10%, which looked conservative to investors after a 13% increase in 2009.
Kraft Foods also weighed on the Dow, with a drop of 63 cents, or 2.1%, to $28.78, after investment sage Warren Buffett gave a big thumbs down to the U.S. food giant’s deal to buy Cadbury for $19.44 billion.
The Dow was also pulled lower by its commodity-related components. Alcoa tumbled 39 cents, or 2.5%, to $15.23, while Chevron dropped $1.53, or 1.9%, to $78.15 and Exxon Mobil fell $1.24, or 1.8%, to $68.03. The declines came after a report the China Banking Regulatory Commission had asked several banks to stop issuing loans.
Among other measures, the technology-heavy Nasdaq Composite fell 29.15, or 1.3%, to 2291.25 while the Standard & Poor’s 500 index dropped 12.19, or 1.1%, to 1138.04.
In Asia, shares traded mostly higher Thursday, recouping losses from earlier in the session, when stocks fell after the economic data from China sparked fears of further monetary tightening measures.
The overall macro picture in China "is one with continued strength in activity growth and rapidly rising inflation," said Goldman Sachs economists in a note. "We believe further policy tightening measures over and beyond what have already been implemented are needed in order to control inflation in the coming months."
The rise in China’s fourth-quarter growth domestic product of 10.7% year-on-year was broadly in line with the 10.8% forecast by a Dow Jones poll, while China’s consumer price index rose 1.9% in December.
China’s Shanghai Composite was 0.2% higher and Japan’s Nikkei 225 was up 1.2%, but Hong Kong’s Hang Seng index fell 2.2%.
Some commentators said the Chinese data were not all doom and gloom. "CPI jumped quite a bit in December, so that may have unnerved the markets, but the downside is limited as the growth is still intact," said Amy Lin at Capital Securities in China.
In the European currency markets Thursday, the euro hit a new five-month low at $1.4059 after a mixed bag of euro-zone purchasing managers’ indexes but then rallied marginally. At 0915 GMT it was trading at $1.4073, down from $1.4107 in late New York trading Wednesday. The pound was quoted at $1.6199, down from $1.6292, while the dollar was trading at Y91.63, up from Y91.25.
Elsewhere, spot gold was trading at $1108.85 per troy ounce, down $3.10 from the New York close, after dropping more than 2% overnight. Nymex March crude oil futures were down 32 cents at $77.42 per barrel. And the European government bond markets were weaker, with the March bund future down 0.08 at 122.96. WSJ.