Friday, 3 July 2009

GLOBAL MARKETS: European Stocks Lower On Econ Recovery Doubts

GLOBAL MARKETS: European Stocks Lower On Econ Recovery Doubts


By Ishaq Siddiqi
Of DOW JONES NEWSWIRES


LONDON (Dow Jones)--European stocks were marginally lower Friday, with investors wary of putting money back into play given concerns over the pace of a potential economic recovery amid thin trading conditions.

"The heightened optimism of the past couple of months has been eroded into, with a dose of reality possibly creeping in with the worrying jobless figures in the U.S.," said Owen Ireland, sales broker at ODL Securities.

At 0830 GMT, the Dow Jones Stoxx 600 index was down 0.3% at 203.43, London's FTSE 100 index was off 0.1% at 4229.83. Frankfurt's DAX index lost 0.4% at 4699.0, and the CAC-40 index in Paris was 0.5% lower at 3100.9.

"Many market participants feel that economic and financial Armageddon has been avoided and therefore the rally from lows in March this year is justified, however there is no clear consensus on how and when recovery will ultimately take hold," said European strategists at Nomura.

With U.S. markets closed to observe Independence Day, Friday, European indexes suffered from low volumes and struggled to make meaningful headway given the lack of direction from across the Atlantic.

And with corporate newsflow thin on the ground, investors kept their focus on some of the day's economic data releases to offer some further clues into the state of the European economy.

Euro-zone retail sales for May are expected at 0900 GMT and recent data coming from the main euro-zone countries have been mixed in May, with German retail sales up by modest 0.5% month on month versus the 1.4% decline in French consumer spending for manufactured goods, noted Annalisa Piazza, strategist at Newedge Group.

"All in all, the picture for euro-zone household spending is not too bleak in 2Q, given the current development of the labour market and still depressed economic conditions. We don't expect household spending to be a boost for growth in the coming quarters, but at least it will be a cushion for another deep economic contraction," added Piazza.

Overnight in the U.S, the weak employment report sent stocks tumbling at the news that the world's largest economy lost 467,000 jobs in June, a much greater decline than the 350,000 economists in a Dow Jones Newswires survey had expected.

Overall, the Dow Jones Industrial Average closed down 223.32 points, or 2.6%, at 8280.74. For the week, the Dow slid 157.65, or 1.9%, marking its third straight weekly decline and its lowest closing value since May 22.

The Standard & Poor's 500 flirted with 900 for much of the day, eventually pushing below that previous support level to 896.42, down 26.91 points, or 2.9%. The index lost 22.38 points, or 2.4%, on the week, also marking its third straight week in the red.

Asian stock markets also fell initially Friday after the dismal U.S. jobs report cast further doubt on a near-term economic recovery, but low trading volumes before the U.S. holiday prevented big declines and the markets came off their lows, with some actually closing in the black.

Japan's Nikkei 225 closed down 0.6%, but Korea's Kospi Composite closed 0.6% higher. Hong Kong's Hang Seng index was last seen 0.1% higher.

Elsewhere, the crude oil futures market still looks weak Friday, continuing Thursday's decline after the weak payrolls release shook confidence in an economic recovery by the world's largest energy user.

At 0835 GMT, the August crude contract on Globex was at $66.45 per barrel, down 28 cents, having settled Thursday at $66.73 per barrel, down $2.58, on the New York Mercantile Exchange.

"The unemployment data showed the economy is not turning around," said Zachary Oxman, managing director at TrendMax Futures in Encinitas, California. "The market is due for a correction and we'll see a lot of money coming out of commodities in the third quarter."

At 0835 GMT, spot gold stood at $931.75/oz, up more than $1 from late New York business Thursday.

In the foreign exchanges, the weaker-than-expected payrolls data prompted a surge in risk aversion, with the U.S. dollar rising against the euro but falling against the Japanese yen. However, some of these moves have now been reversed in Asian and early European trading.

"The U.S. is closed Friday to mark Independence Day. As such, there are no U.S. data releases, and liquidity is likely to be thin, which may result in some very choppy price action across currency pairs," said Christian Lawrence at RBC Capital Markets.

At 0835 GMT, the euro stood at $1.3999, compared with $1.4004 late Thursday in New York, with the dollar at Y95.93, basically unchanged versus Y95.95.

The safe-haven sovereign debt markets are a touch lower Friday, as investors take profits after Thursday's sharp gains on demand for low-risk government debt. Still, trading is likely to be limited with the U.S. market closed Friday.

At 0835 GMT, the September bund contract stood at 121.56, down 0.10.

-By Ishaq Siddiqi, Dow Jones Newswires; +44-20-7842-9488; ishaq.siddiqi@dowjones.com

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(END) Dow Jones Newswires

July 03, 2009 04:38 ET (08:38 GMT)


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