US corporate worries weigh on world markets

LONDON — World stock markets fell and oil prices sank back towards the $60 a barrel mark Wednesday amid mounting worries about the speed of any global economic recovery just as the U.S. second-quarter earnings kicks off.

In Europe, the FTSE 100 index of leading British shares was down 7.45 points, or 0.2 percent, at 4,179.55 while Germany’s DAX fell 15.89 points, or 0.4 percent, to 4,582.30. The CAC-40 in France was 28.39 points, or 0.9 percent, lower at 3,020.18.

Earlier in Asia, Japan’s benchmark Nikkei 225 stock average tumbled 227.04 points, or 2.4 percent, to 9,420.75 — its sixth fall in a row and its lowest close in six weeks. Worse-than-expected machinery orders data disappointed investors and fanned concerns about the fragility of the world’s second-biggest economy.

The losses in Europe and Asia follow further declines on Wall Street — the Standard & Poor’s 500 index is now below its 50-day and 200-day moving averages and below where it started the year, even after 15 percent gains in the second quarter, its best performance since 1998.

The start of the second-quarter earnings reporting season later will provide clues about whether companies have already seen the worst of the recession or whether they are still struggling in the first synchronized global economic downturn since the Second World War. Aluminium company Alcoa Inc. is the first Dow constituent to report.

“The Q2 earnings season starts today and investors will be monitoring this closely to see whether earnings estimates are justified,” said Neil Mackinnon, chief economist at ECU Group.

“I think they are not so I am expecting disappointment,” he added.

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.

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. Since peaking in early June, the S&P and the Dow Jones industrial average have dropped around 7 percent.

“Given the strong performance of stocks relative to March lows, a reality check from earnings could be detrimental to risk appetite,” said Ashley Davies, an analyst at UBS.

Worries that may be the case weighed on expectations about Wall Street’s performance later. Dow futures were up a modest 3 points at 8,134 while the S&P 500 futures rose 0.7 point to 880.

Stocks aren’t the only investments suffering at the moment. Oil prices have fallen over $10 a barrel over the last week or so amid the waning investor optimism. Benchmark crude oil for August delivery fell 72 cents to $62.21 a barrel in electronic trading on the New York Mercantile Exchange.

Elsewhere in Asia, Hong Kong’s Hang Seng index dropped 0.8 percent, to 17,721.07 while South Korea’s Kospi lost 0.2 percent to 1,431.02. Mainland China’s Shanghai Composite index — the world’s best-performing index this year — slipped 0.3 percent, while Australia’s key stock measure was flat.

The dollar was down 0.1 percent at 95.11 yen while the euro was steady at $1.3975.

Stuart Bennett, senior foreign exchange strategist at Calyon Credit Agricole, noted that the euro has lost over 2 percent of its value against the dollar since the start of June — around half the losses posted in stock markets.

“This apparent greater sensitivity does indicate that the euro would be vulnerable if concerns over equities come to fruition,” he said

AP Business Writer Tomoko A. Hosaka in Tokyo contributed to this report.