Shares tick lower, but Euro recovers
World stock markets fell modestly yesterday while prices of safe-haven German bonds and US Treasuries rose as weak economic data from Europe raised concerns about the health of the global economy.
Financial shares in the United States rallied on strong corporate results 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 per cent from three per cent. The World Bank said a slow recovery in developed nations was holding back the global economy.
The Dow Jones industrial average was down 19.33 points, or 0.14 per cent, at 13,515.56. The Standard & Poor’s 500 Index was up 0.54 points, or 0.04 per cent, at 1,472.88. The Nasdaq Composite Index was up 7.90 points, or 0.25 per cent, at 3,118.67.
Losses in US equities were offset by financial shares. Goldman Sachs rose 2.4 per cent to $138.82 after it reported fourth-quarter earnings that nearly tripled, while revenue surged on dealmaking. Peer financial services firm Morgan Stanley rose 0.5 per cent at $20.53.
JPMorgan Chase & Co also reported sharp increases in earnings, but its stock fell 1.6 per cent to $45.60. The MSCI world equity index fell 0.3 per cent while Europe’s FTSE Eurofirst 300 index was up slightly following a series of losses. Japan’s benchmark Nikkei stock average shed 2.6 per cent for its largest daily fall in eight months.
Along with the weak World Bank outlook, industry figures showed European new car sales plunged in 2012 to the lowest level since 1995, with all major eurozone markets suffering, whereas Britain andSweden 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.
However, the euro recovered some of its losses against the dollar after a European Central Bank policy-maker eased fears that officials might undermine the currency’s recent strength. The euro was trading just below $1.33 at around $1.3290 , 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. Ten-year German bond yields in the secondary market rose to put yields at 1.489 per cent.
Cold weather in Europe and the United States underpinned oil prices but the rising fears over the global growth outlook meant any gains were limited.
The Organisation 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.
Gold was up 0.6 per cent 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.