World markets await US earnings season kick-off
LONDON — European stocks shed modest gains Tuesday after Wall Street opened lower, amid concern that upcoming U.S. second-quarter earnings will disappoint.
In Europe, the FTSE 100 index of leading British shares was up 13.52 points, or 0.3 percent, at 4,208.43 while Germany’s DAX rose 3.45 points, or 0.1 percent, to 4,655.27. The CAC-40 in France was 7.58 points, or 0.3 percent, higher at 3,089.74.
On Wall Street, the Dow Jones industrial average was down 43.68 points, or 0.5 percent, at 8,281.19 soon after the open while the broader Standard & Poor’s 500 index fell 4.12 points, or 0.5 percent, to 894.60.
The start of the second-quarter earnings reporting season will provide clues about whether companies have already seen the worst of the recession. U.S. aluminum giant Alcoa Inc. opens earnings season on Wednesday.
“There is little of note on the economic calendar, suggesting a directionless day ahead, and it would not be surprising to see stock markets edge lower as traders choose to stay on the sidelines before the earnings season gets into full swing,” said Philip Gillet, a sales trader at IG Index.
Equities rose from the middle of March until the start of June on hopes that the U.S. economy in particular will recover from recession sooner than anticipated. The S&P 500 index in the U.S. rose around 16 percent during the second quarter, its best performance since 1998, amid hopes of a global recovery despite worries about the banking system, public finances and the length and depth of the recession.
But disappointing economic news over the last few weeks, culminating in last Thursday’s worse than expected U.S. jobs report for June, has altered the general mood prevailing among investors that a significant rebound in the U.S. was a distinct possibility. A sharp rebound in U.S. economic activity will not emerge until unemployment stops rising.
“Given the strong performance of stocks relative to March lows, a reality check from earnings could be detrimental to risk appetite,” said Gareth Berry, an analyst at UBS.
Oil prices continued to fall amid the global economic uncertainty, with benchmark crude for August delivery down 34 cents at $63.71 a barrel. On Monday, the benchmark contract slid $2.68 to settle at $64.05.
Earlier, Asian stocks were weighed down by waning investor optimism about the global economic recovery ahead of this week’s meeting of the Group of Eight leaders in Italy. Japan’s Nikkei 225 stock average fell for the fifth straight day, closing down 33.08 points, or 0.3 percent, at 9,647.79.
Hong Kong’s Hang Seng shed 117.14, or 0.7 percent, to 17,862.27, while South Korea’s Kospi rose 0.4 percent to 1,434.20. China’s Shanghai fell 1.1 percent. Australia’s market retreated 0.4 percent but Singapore trimmed gains to be almost flat.
The dollar was down 0.2 percent at 95.04 yen while the euro was up 0.1 percent at $1.3990.
Mitul Kotecha, head of global currency strategy, said foreign exchange markets will continue to be dictated by movements in equities but that “the lack of clear direction on this front suggests little appetite to break out of current ranges.”
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AP Business Writer Stephen Wright in Bangkok contributed to this report.
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