Global stocks mostly lower ahead of Fed

AP News
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Posted: Jul 11, 2012 1:15 PM
Global stocks mostly lower ahead of Fed

AMSTERDAM (AP) — Global stock markets struggled Wednesday, as Europe's debt crisis rolls on and investors brace themselves for mediocre second-quarter corporate profits. U.S. markets slipped on fears the Federal Reserve may not give much hope for further easing when it next meets.

In Europe, where Spain's debt woes continue to take center stage, Britain's FTSE 100 closed flat at 5,664.48. France's CAC-40 shed 0.57 percent to 3,157.25, while Germany's DAX rose 0.24 percent to 6,453.85.

"Some large international investors have declared publicly they are shunning eurozone investments altogether," said Monument Securities Analyst Stephen Lewis. "Their asset reallocations are presumably contributing to downward pressure on (government bond) yields in US and UK markets, among others."

Wall Street declined in early trading, with the Dow Jones industrial average down 0.23 percent at 12,624.40 and the S&P 500 risking its fifth straight decline, flat at 1,341.81.

With second-quarter corporate earnings beginning to trickle in amid low expectations, attention is focused on whether the U.S. Federal Reserve will follow the European Central Bank and the People's Bank of China in easing policy via another round of Treasury bond purchases known as quantitative easing.

Analysts will be combing the minutes of the latest Fed meeting, scheduled to be released later Wednesday, for hints of the central bank's view on the economy and possible policy moves.

Corporations are striking a negative tone, with Advanced Micro Devices saying Tuesday that weaker sales in China and Europe led to an 11 percent drop in revenue in the April to June period. The company had previously forecast a gain of 3 percent. In Britain, retailer Marks & Spencer reported a 2.8 percent drop in sales. Aluminum maker Alcoa beat earnings expectations Monday, but sales fell 9 percent. Truck engine maker Cummins said Tuesday 2012 sales would be flat, rather than the 10 percent growth it had initially forecast. JPMorgan and Google report results later this week.

Meanwhile, Europe's debt crisis has wounded investor and consumer confidence, and some of the region's countries, such as Greece and Spain, are in deep recession.

"The eurozone needs dramatic action to stop the downward spiral," said Jan Amrit Poser, chief economist at Bank Sarasin.

Fiscal stimulus is not on the cards for European governments who are cutting spending instead. Spain's Prime Minister Mariano Rajoy announced a new round of spending cuts on Wednesday. Earlier this week European finance ministers promised the country €30 billion by the end of the month to prop up its weak banks, but Germany's constitutional court said Tuesday it won't decide whether Europe's bailout fund is legal for months.

"Once again these events have highlighted that the crisis in Europe owes a lot to issues regarding governance and underpins the worry that the pace of movement towards greater fiscal ties within the Eurozone will be disappointingly slow," said Rabobank foreign exchange analyst Jane Foley.

The euro hit year lows against the dollar again earlier Wednesday and has recovered to $1.2253, up 0.02 percent on the day. The dollar rose to 79.565 yen from 79.45 yen.

Japan's Nikkei 225 index fell 0.1 percent to 8,851.00 ahead of a meeting of the Central Bank of Japan, while Hong Kong's Hang Seng added 0.1 percent at 19,419.87.

Benchmark West Texas Intermediate light crude oil for August delivery was up $2.50 at $86.41 a barrel in electronic trading on the New York Mercantile Exchange.