While you were sleeping: Cold shrinks UK economy
While you were sleeping: Cold shrinks UK economy
(BusinessDesk) January 26 - Stocks on Wall Street and in Europe fell, along with commodities, as corporate earnings failed to please investors and as an unexpected contraction in the U.K. economy re-ignited concern about the pace of the global recovery.
J&J, 3M Co, DuPont and American Express Co were among companies that reported results since the close of trading on Monday.
3M declined as results barely topped estimates. J&J dropped after forecasting 2011 earnings below expectations.
"Stocks have rallied such that you need to have really blowout numbers for shares to continue gaining," Michael Yoshikami, president and chief investment strategist at YCMNET Advisors in Walnut Creek, California, told Reuters.
"I think we'll see a trend of strong earnings but stocks that dip afterwards," he said.
In midday trading, the Dow Jones Industrial Average fell 0.42%, the S&P 500 Index declined 0.48% and the Nasdaq Composite Index shed 0.45%.
A two-day U.S. Federal Open Market Committee meeting starts today, as the Conference Board’s index of sentiment showed that confidence among U.S. consumers grew more than expected in January to the highest level in eight months.
Data showing the UK economy unexpectedly contracted in the last three months of 2010 hurt the country’s stocks and currency, and called into question Europe’s economic prospects.
Sterling dropped 1.5% to US$1.5760, while the Britain's FTSE shed 0.6% after the economy shrank 0.5% in the last quarter of 2010, the first time in five quarters.
"The UK GDP may be a warning sign of what is to come in Europe. Market participants may reassess the rate hike scenarios which had led to a short squeeze," Lee Hardman, currency economist at Bank of Tokyo-Mitsubishi UFJ, told Reuters.
The benchmark Stoxx Europe 600 Index dropped 0.6%.
The euro fell to US$1.3619, after earlier rising a two-month high of US$1.3688, according to electronic trading platform EBS.
Commodities declined as an overnight rate increase in India and the surprise contraction in the UK economy renewed concern about demand for raw materials.
The Reuters-Jefferies CRB index headed for its largest drop in three weeks.
By 1257 GMT, U.S. crude benchmark West Texas Intermediate was down US$1.23 at US$86.64 a barrel. Brent future prices were down US$1.19 to US$95.42 a barrel.
"Everything is down today, not just crude," Commerzbank's Carsten Fritsch told Reuters.
Copper dropped more than 2% and gold fell to its lowest in 10 weeks.
Spot gold was bid at US$1,326.90 an ounce at 1548 GMT, against US$1,334.25 late in New York on Monday. U.S. gold futures for February delivery fell US$18.10 to US$1,326.40.
"[We forecast gold] to have a bad first quarter," Mitsubishi analyst Matthew Turner told Reuters.
"Economic data ended the year quite strongly and I thought if it carried on strongly, interest rate expectations would start to rise.
"But maybe the economic outlook isn't as rosy as people think, and maybe we will see a recovery [in gold prices] from Q2 onwards," he said.
(BusinessDesk)