Published — Tuesday 8 January 2013
Last update 9 January 2013 12:54 am
NEW YORK: Global shares fell, with US investors cautious ahead of an earnings season
expected to show sluggish growth in corporate profits.
European shares were flat as data showed the euro zone economy may be stabilizing, though at a weak level. The euro held steady while commodity markets were largely subdued as
investors sat on recent gains.
Profits in the US fourth quarter are seen above the previous quarter’s lackluster results, but analyst estimates are down sharply from where they were in October. Quarterly earnings are expected to grow by 2.8 percent, according to Thomson Reuters data.
Alcoa Inc. reports results after the market closes yesterday, and as the first Dow component to report, the aluminum company’s results are seen as setting the tone for the season.
If earnings growth appears to be “less bad” than expected, that would fuel a near-term uptick in the market, according to Eric Wiegand, senior portfolio manager at US Bank Wealth Management in New York. “There’s still ample areas for concern,” he added, citing policy worries in Washington and uneven economic activity.
In Europe, the data was mixed. Euro zone business confidence improved again in December, but unemployment reached a record and households held back from spending in the run-up to
Christmas, suggesting a recovery from recession will be slow.
German industrial orders also fell more than forecast due to a sharp drop in demand from abroad.
“Things are bad. It is still consistent with recession, but at least they have stopped deteriorating,” said Deutsche Bank economist Gilles Moec.
European shares edged down 0.08 percent. The euro held steady at just over $1.3120. Global shares measured by MSCI’s ACWI price index fell 0.5 percent.
The Dow Jones Industrial Average was down 66.04 points, or 0.49 percent, at 13,318.25. The Standard & Poor’s 500 Index was down 8.86 points, or 0.61 percent, at 1,453.03.
The Nasdaq Composite Index was down 16.10 points, or 0.52 percent, at 3,082.71.
In the currency market, the dollar paused a sharp rally against the yen that has boosted it almost 12 percent in less than two months. The rise has come as expectations grow that Japan’s new government will push the central bank to ease policy aggressively in the next few months.
The dollar was last down 0.4 percent at 87.40 yen, some way off the 2-1/2-year high of 88.48 hit last Friday.
“We will perhaps see a marginal retracement (in dollar/yen) over the next couple days and I’d be slightly more bearish dollar over the next few days ... on profit-taking,” said Geoff Kendrick, FX strategist at Nomura.
Bond markets smoothly digested the first debt sales of the year by the Netherlands and Austria, as well as Spain’s announcement that it plans to borrow 121.3 billion euros this year, 7.6 percent more than in 2012.
Madrid is expected to turn to official lenders for a bailout in 2013, although a European Central Bank promise to preserve the euro has significantly reduced the pressure.
German government bond prices also edged higher as investors dipped a toe back into the market for low-yielding but secure assets as a steep selloff last week made valuations more attractive.
The German bund future was up 42 ticks at 143.48, climbing for a second day after a small rise on Monday and moving in line with US Treasuries. The rebound follows a three-point sell-off last week when an easing of US fiscal concerns caused investors to pile into riskier assets.
The benchmark 10-year US Treasury note was up 8/32, the yield at 1.8709 percent.
In commodity and metals markets, Brent crude oil rose 0.2 percent, steadying above $111 a barrel, while US light crude was down 0.4 percent at $ 92.82. Copper was down 0.2 percent and gold edged back above $ 1,655 an ounce before data on Thursday from China and the ECB’s monthly
“The market is underpinned by expectations that a cyclical rebounding out of China will be positive for industrial metals, and there is more positive sentiment now in the market,” said Robin Bhar, analyst at Societe Generale.