European stocks turn lower as US heads for fall
LONDON — European stock markets fell Tuesday ahead of an expected retreat on Wall Street as the two-week rally appeared to be running out of steam following a mixed batch of corporate earnings.
In Europe, Germany’s DAX was down 19.94 points, or 0.4 percent, at 5,231.61 while France’s CAC-40 fell 8.39 points, or 0.3 percent, at 3,363.97. The FTSE 100 index of leading British shares was down 34.19 points, or 0.8 percent, 4,551.94. If the FTSE manages to recoup those losses and close higher it would mark its 12th straight day of gains — a new record for the index.
Wall Street was set to shed some recent gains. Dow futures were down 47 points, or 0.5 percent, at 9,023 while the broader Standard & Poor’s 500 futures fell 6.4 points, or 0.7 percent, to 973.50.
Stocks have rallied strongly over the last couple of weeks after better than expected U.S. earnings pushed many of the world’s leading indexes to 2009 highs amid hopes that the worst of the recession was over. Equities usually rally around 6-9 months before actual economic growth emerges.
Analysts said it was unsurprising that stocks are shedding some gains in light trading volumes, partly because of the traditional summer lull when investors decamp on vacation.
“Sentiment is still positive but it looks as if investors are happy to be on the sidelines for the moment, following the relentless rally over the past couple of weeks,” said Philip Gillet, a sales trader at IG Index.
While most of the focus has centered on U.S. earnings, the European reporting season has kicked into gear this week, providing investors with crucial insight about whether the recession is easing as much as it apparently is in the U.S.
So far, the evidence has been mixed.
Deutsche Bank AG fell nearly 9 percent, making it the biggest faller on Germany’s DAX, after it booked big credit loan losses despite a 67 percent rise in second quarter net profit. But EADS NV was near the top of the CAC-40 leaderboard — rising by around 5 percent — after it said it still plans to deliver as many Airbus planes as last year alongside a 76 percent increase in second quarter net profit.
Meanwhile, BP PLC, Europe’s second biggest oil company, saw its share price fall over 1 percent after in-line second quarter results prompted a bout of profit-taking — BP has performed particularly well in the last month in the run-up to the results.
Earnings will continue to dominate sentiment in Europe over the rest of the week. Among other steelmaker Arcelor Mittal, carmaker Daimler AG, chemical company BASF SA, France Telecom SA and Royal Dutch Petroleum will report.
It’s a quieter week in the U.S. though there will be interest in earnings from media company Time Warner Inc., Dow Chemical Co., Colgate-Palmolive Co, Walt Disney Co. and ExxonMobil Corp.
Analysts said that the bar has been raised by the recent strong U.S. earnings and that as a result, upcoming results will have to outperform by a large amount to garner the same positive response in the markets.
“The U.S. equity market rally could start to peter out with the market having already priced in upside surprises in earnings,” said Hans Redeker, an analyst at BNP Paribas.
Earlier in Asia, most markets closed higher, though Tokyo’s Nikkei 225 stock average fell a minuscule 1.4 points to 10,087.26. Hong Kong’s Hang Seng outperformed its regional counterparts, closing up 372.92 points, or 1.8 percent, at 20,624.54.
Elsewhere in Asia, markets in Shanghai and Seoul recouped their losses to finish higher by 0.1 percent.
Australia’s index gained 0.7 percent and India’s Sensex was up 0.2 percent.
Oil prices fell in line with stocks, with benchmark crude for September delivery down 62 cents to $67.76 a barrel. On Monday, the contract rose 33 cents.
The dollar fell 0.7 percent to 94.53 yen, while the euro slipped 0.1 percent to $1.4223.
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AP Business Writer Jeremiah Marquez in Hong Kong contributed to this report.
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