European stock markets extended losses yesterday after another set of bad US data added to growing fears the US economy risks falling back into recession.
Dealers said investors were increasingly nervous as US statistics go in one direction – much slower growth which could undercut the global recovery despite the strong lead shown by China and Asia as a whole, alongside Germany in Europe.
“Once again markets are in negative territory – jittery over prospects for further recovery and particularly nervous on prospects for resumption of ‘real’ growth any time soon,” said Howard Wheeldon, senior strategist at BGC Brokers.
In London, the FTSE 100 index of leading shares closed down 0.90 per cent at 5,109.40 points. In Paris, the CAC 40 lost 1.17 per cent to 3,450.19 points and in Frankfurt the DAX shed 0.61 per cent at 5,899.50 points.
Dealers said the markets were focused on the US economy and discounted news the closely watched Ifo climate index of German business confidence hit 106.7 points in August from 106.2 points in July – the highest level since June 2007.
Instead, investors were worrying about revised US second quarter growth figures due Friday, expected to come in much lower at 1.4 per cent compared with the preliminary figure of 2.4 per cent, they said.
Such concerns were made much worse by figures yesterday showing US new home sales in July plunging 12.4 per cent from June to the lowest level since 1963, wrong-footing analyst forecasts for a solid gain.
US July durable goods orders increased only 0.3 per cent; also well short of estimates and painting a picture of weakening demand which will do nothing to create the jobs needed to keep the economy on track.
In New York, after losing 1.32 per cent on Tuesday the blue-chip Dow Jones Industrial Average was down 0.24 per cent, coming off early lows which saw the index dip below the psychologically sensitive 10,000-points level.
At around 1600 GMT, the tech-rich Nasdaq Composite was little changed.
“Durable goods was a very poor number,” said Marc Pado, a market analyst at Cantor Fitzgerald, adding: “We are going to a bottom of a bigger range in the market based on the fact the we face a double-dip (recession).”
Mr Pado warned that Friday’s growth figures loom large although he felt some of the recent losses may have been overdone, with most of the bad news already in the market.
Elsewhere in Europe, Amsterdam fell 0.53 per cent, Brussels shed 0.49 per cent, Madrid lost 1.57 per cent, Milan fell 1.17 per cent and Swiss stocks were off 0.74 per cent.
In contrast to stocks, bond markets continued to attract money as investors sought out their relative safety, even if the returns are at record lows.
The yield or effective rate of return on the 10-year US Treasury bond fell to 2.451 per cent in midday trade from 2.499 per cent on Tuesday.