World stocks lower as earnings disappoint

AP News
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Posted: Oct 26, 2010 9:58 AM
World stocks lower as earnings disappoint

World markets fell Tuesday as corporate earnings reports across all sectors _ from technology, to financial and industrial _ mostly left investors disappointed.

Although many companies are reporting fairly healthy profits for the last quarter, their outlook is often dampened by expectations of an economic slowdown, with households increasingly cautious about spending and governments pushing through sharp austerity cuts, particularly in Europe.

Weak housing data from the U.S., which suggests the recovery in the world's largest economy remains bumpy, further weighed on sentiment.

Germany's DAX index was down 0.7 percent at 6,592.15 and France's CAC-40 was 1.1 percent lower at 3,829.27.

In Britain, the FTSE 100 index was down 1.1 percent at 5,690.19 despite a report showing the economy there grew 0.8 percent, twice as fast as expected, in the third quarter. While that figure may delay any extra stimulus measures from the Bank of England, economists agree that growth will weaken in the future, particularly since the government recently announced the sharpest spending cuts since World War II.

Earnings reports were investors' main focus Tuesday. Although Swiss bank UBS reported profit gains, its shares slumped 5.4 percent as analysts focused on weakness in its core investment banking operations.

Denmark's Vestas, the world's largest wind turbine maker, said earnings fell and announced 3,000 layoffs to deal with a weaker European market. Its stock slumped 6.8 percent.

Finally, ArcelorMittal, the world's largest steelmaker, saw its shares fall 3.7 percent after it said the outlook for the rest of the year is uncertain due to muted demand.

Asian markets mostly closed lower and Wall Street fell on the open. The Dow industrials average was down 0.6 percent at 11,098 while the Standard & Poor's 500 was 0.5 percent lower at 1,179.

A strong earnings report from chemicals maker DuPont was offset by a slump in Ford shares. Although the carmaker's earnings beat forecasts, investors were spooked by its offer to swap debt for common stock, which will dilute shareholders' stakes.

Drugmaker Bristol-Myers Squibb Co. reported a better-than-expected profit, but revenue fell short of forecasts. Sales were hurt by the U.S. health care overhaul bill passed earlier this year.

Economic data out of the U.S. was not bright either _ the Standard & Poor's/Case-Shiller home price index fell 0.2 percent in August. Fifteen of the 20 cities measured in the index saw price declines, indicating the housing market remains very weak.

Looking ahead, investors will keep an eye on a consumer confidence indicator. This will help gauge the health of the economy and the likelihood that the Federal Reserve will act to boost the money supply.

Expectations that it will provide more stimulus has weighed heavily on the dollar, which hit 15-year lows. It edged up Tuesday, to 81.01 yen from 80.83 yen in New York late Monday, but was not far from its post-World War II low of 79.75 set in 1995. The euro rose to $1.3953 from $1.3918.

The yen's rise has hurt major Japanese exporters, many of whom will report earnings later this week. They include Sony Corp. and Honda Motor Co.

The Nikkei 225 stock average closed down 23.78, or 0.3 percent, at 9,377.38 on Tuesday.

Australia's S&P/ASX 200 shed 0.5 percent amid news that lawmakers are threatening to scuttle a $8.3 billion deal for Singapore Exchange to buy ASX, the operator of the Australian stock market, saying it is against the country's interests. ASX shares tumbled 7 percent.

The two exchanges hope the deal will make them big enough to avoid being marginalized by cross-border trading platforms that are undermining the dominance of traditional stock markets.

Hong Kong's Hang Seng index slipped 0.1 percent to 23,610.24 and the Shanghai Composite Index fell 0.3 percent at 3,041.54. South Korea's Kospi added 0.2 percent to 1,919.41.

Markets in India, Singapore, Indonesia and New Zealand fell while Taiwan and Malaysia gained.

Benchmark crude for December delivery was down 36 cents, or 0.4 percent, to $83.18 a barrel in electronic trading on the New York Mercantile Exchange.