Monday 28 September 2009

GLOBAL MARKETS: European Stocks Seen Lower On Earns Concerns

Mon, Sep 28 2009, 06:26 GMT

GLOBAL MARKETS: European Stocks Seen Lower On Earns Concerns

By Ishaq Siddiqi

LONDON (Dow Jones)--European stock markets are expected to open on a weaker note Monday, weighed down by negative sessions on U.S. markets Friday and Asia earlier Monday, as concerns mount over the quality of upcoming third quarter corporate earnings.

Following the disappointment from Blackberry maker Research in Motion, there’s a growing feeling among analysts that the next set of results out of corporate America won’t be as rosy as the previous quarter, said Ben Potter, research analyst at IG Markets.

"Globally, the momentum generated from second quarter earnings is fast abating with investors concerns growing by the day as to whether or not this market has got ahead of itself. Gone are the days of rising on ‘less bad’ economic releases. The market is desperately searching for the next catalyst to take us higher and at the moment, no one seems to know where it might come from," he said.

Potter expected London's FTSE 100 index to open 15 points lower at 5067, Frankfurt's DAX index off 11 points at 5570, and the CAC-40 index in Paris 21 points lower at 3718.

Still, as the week progresses, "we have the final U.K. GDP figure for 2Q tomorrow (at 0830 GMT) and the U.S. non farm payrolls on Friday (at 1230 GMT) as just a couple of the higher profile numbers due, so although the short term may end up being focused on consolidation, there’s certainly scope for another break out in the coming days," Potter added.

Earlier Monday, Asian stock markets were sharply lower, tracking Wall Street's weak showing on Friday. Tokyo stocks were leading the losers, hurt by the Japanese yen's continued strength against the dollar.

"Concern over the yen’s recent appreciation and how this will impact profits in Japan is weighing heavily across the continent and with the month-end nearing, the potential for traders to keep taking money off the table amidst this current uncertainty cannot be overlooked," said Potter.

Japan's Nikkei 225 index closed 2.5% lower at 9994.66, below the key 10,000 mark for the first time since July. South Korea's Kospi Composite was down 0.8%, and Hong Kong's Hang Seng Index was down 1.6%.

On Wall Street Friday, a prevailing concern that the nearly six-month surge in stocks may have overextended the current economic environment forced some of the best-performing companies of the third quarter, including Caterpillar and American Express, to the downside Friday, while Research In Motion paced technology companies into the red.

Overall, the Dow Jones Industrial Average slipped 0.4% to 9665.19, marking its fourth decline in five sessions. The index lost 155.01 points, or 1.6%, this week, snapping a two-week winning streak. For September, the DJIA remains up 1.8%. The Standard & Poor's 500 lost 0.6% to 1044.38, on Friday, closing out the week down 23.92, or 2.2%.

In the currency markets, the spotlight was on the rising Japanese yen. At 0620 GMT, the dollar was buying Y89.36, down from Y89.76 late in New York trade on Friday. The dollar hit Y88.23 earlier, an eight-month low, with the yen bolstered by increased risk aversion as well as exporters' yen purchases for settling accounts before the end of the third quarter.

Japanese Finance Minister Hirohisa Fujii told reporters early Monday that he had no comment on the current level of the yen against the dollar, but the yen's recent strengthening trend was "not abnormal." He added that it was a mistake to use "foreign exchange dumping" to defend industry.

Royal Bank of Scotland said in a note that "investors may try to push the dollar below the year's low of Y87.10 in the early stage of this week. But still, we don't think the Japanese government will step into the market to curb the yen's rise."

The euro was also hit by increased risk aversion, and touched a two-month low against the yen of Y129.84. It was last at Y130.58 from Y131.72 in late New York trade on Friday. The euro was at $1.4613, from $1.4672.

Meanwhile, the sterling continued its recent selloff against the greenback. At 0620 GMT, sterling stood at $1.5844, compared with $1.5932 on Friday.

Elsewhere, spot gold traded at $989.55 per troy ounce, down over $4 from the New York close, while Nymex light, sweet crude contract for November delivery was 36 cents lower on Globex, at $65.66 per barrel.

European government bonds have opened strongly Monday, boosted by the weak tone on the equity markets. At 0625 GMT, the December bund contract stood at 121.73, 0.25 higher.

-By Ishaq Siddiqi, Dow Jones Newswires; +44-20-7842-9488;

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(END) Dow Jones Newswires

September 28, 2009 02:26 ET (06:26 GMT)

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