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Global shares retreat as economic growth concerns revive

MARKETS-GLOBAL:Global shares retreat as economic growth concerns revive

Reuters  |  New York 

new York 01 16, 2013, 21:30 IST

World stock fell on Wednesday while prices of safe-haven German bonds and U. S. Treasuries rose as weak economic data from Europe raised concerns about the health of the economy.

Financial shares in the United States rallied on strong corporate from Goldman Sachs , helping to limit some of the broader market losses, which came as the World Bank sharply cut its outlook for world growth.

The view for 2013 growth was reduced to 2.4 percent from 3 percent. The World Bank said a slow recovery in developed nations was holding back the economy.

"This is not a robust forecast, and that's a concern, especially as it pertains to the continued weakness in Europe. Things are stabilized, but we're still only seeing slow growth," said Steven Baffico, chief executive officer at Four Wood Capital Partners in New York.

The Dow Jones industrial average was down 36.74 points, or 0.27 percent, at 13,498.15. The Standard & Poor's 500 Index was down 1.79 points, or 0.12 percent, at 1,470.55. The Nasdaq Composite Index was up 4.26 points, or 0.14 percent, at 3,115.04.

Losses in U. S. equities were offset by financial shares.

Goldman Sachs rose 2.4 percent to $138.82 after it reported fourth-quarter earnings that nearly tripled, while revenue surged on dealmaking.

JPMorgan Chase & Co also reported sharp increases in earnings, but the stock fell 1.6 percent to $45.60.

The MSCI world equity index fell 0.5 percent while Europe's FTSE Eurofirst 300 index dipped 0.2 percent, on course for its fourth day of losses in the last five sessions. Japan's benchmark Nikkei stock average shed 2.6 percent for its largest daily fall in eight months.

Along with the outlook, industry figures showed European new car sales plunged in 2012 to the lowest level since 1995, with all major euro zone suffering, whereas Britain and Sweden recorded growth. This came a day after Germany reported its economy shrank at the fastest pace in almost three years in the final quarter of 2012.

"Following the German growth numbers yesterday there is simply a realization the recession in the euro zone in the fourth quarter will be much bigger than the previous consensus," said Daiwa Securities economist Tobias Blattner.

However, the euro recovered some of its losses against the dollar after a European Central Bank policymaker eased fears that officials might undermine the currency's recent strength.

The euro was trading just below $1.33 at around $1.3275, having made up some of the ground lost when the outgoing head of Eurogroup, Jean-Claude Juncker, said the currency was "dangerously high.

The turnaround came when ECB policymaker Ewald Nowotny said the exchange rate was "not a matter of major concern," reassuring investors that the central bank would not target a weaker exchange rate to help the region's struggling economies.


In bond markets, Germany drew healthy demand for its debt at an auction of new 10-year bonds.

"Uncertainties about the economic outlook and political risks continue to loom and today's auction are a sign that market dealers still see some value in core (European) debt," said Annalisa Piazza, market economist at Newedge.

Ten-year German bond yields in the secondary market rose slightly to put yields at 1.479 percent.

U. S. Treasury prices, meanwhile, extended their recent gains on concerns about the federal government's debt limit. The benchmark 10-year U. S. Treasury note was up 5/32, the yield at 1.8185 percent.

Assets traditionally viewed as offering protection against risk have been boosted this week as political wrangling has begun again over raising the U. S. government's self-imposed debt limit, which is expected to be reached before March.

Gold was up 0.6 percent to $1,676.60 an ounce for a third straight session of gains, supported by expectations that the world's leading central banks will continue their ultra-loose monetary policies.

Worries over supply pushed platinum prices up 0.1 percent to $1,680.50 to mark a seventh straight session of gains, the longest upward streak since early October.

Workers for top producer Anglo American Platinum downed tools on Wednesday in protest at an announcement from the firm, known as Amplats, that it would close mines and cut jobs.

Cold weather in Europe and the United States underpinned oil prices but the rising fears over the growth outlook meant any gains were limited.

The Organization of the Petroleum Exporting Countries, in a monthly report, also said demand for its crude would be lower than expected in 2013 because of higher supply from rival producers.

Brent futures were up 18 cents to $110.48 a barrel, while U. S. oil rose 5 cents to $93.33.

First Published: Wed, January 16 2013. 21:21 IST