NEW YORK: Disappointing economic data in Asia sent world stocks lower yesterday as investors fretted over the darkening global growth outlook.
Weaker — than — expected Chinese inflation data and a record fall in Japan's machinery goods orders added on to last Friday's dismal US jobs report and raised concerns the global economy is hitting a soft patch.
Wall Street was lower in the early afternoon as investors were also bracing for the start of corporate earnings season, with Alcoa reporting results at the end of the day.
Doubts that a meeting of euro zone finance chiefs will result in much progress further dented sentiment, while yields on benchmark Spanish and Italian bonds were moving up to levels considered unsustainable.
Diplomats said on Monday that Europe will grant Spain an extra year to reach its deficit targets after it outlines further budget savings to a finance ministers meeting in Brussels.
"While reasons for optimism seem to be few and far be tween these days, reasons for extreme pessimism are too, " said Randy Frederick, managing director of active trading & derivatives at Charles Schwab.
" Although structural issues in Europe are far from resolved, it appears that the threat of a near-term market meltdown has been somewhat alleviated for now."
Speculation policymakers will step in with further efforts to boost the economy helped to limit losses.
The euro rose against the dollar yesterday in a mostly technical rebound from a two-year low touched earlier in the session
The euro was last up 0.2 percent against the dollar at $1.2310 after climbing as high as $1.2324 and well off a low of $1.2255 hit in thin early trade.
The FTSEurofirst 300 index ended down 0.4 percent at 1,030.09. The MSCI world index, hit by a weaker session in Asia, was down 0.5 percent, a fourth straight day of declines.
The Dow Jones Industrial Average dropped 37.73 points, or 0.30 percent, to 12,734.74. The Standard & Poor's 500 Index fell 2.25 points, or 0.17 percent, to 1,352.43. The Nasdaq Composite Index slipped 4.52 points, or 0.15 percent, to 2,932.81.
In the United States, investors were bringing their attention closer to home with Alcoa's results after the closing bell.
Corporate outlooks are at their most negative in nearly four years and companies that have already reported have shown lackluster growth. Nearly two dozen S&P firms have already cited Europe's woes — which seem to be worsening — as a concern.
"Ultimately the question is: Are companies making money — are lower gas prices translating into enough of a relief for consumers that they are spending money on other goods and services? The next quarter will tell us exactly how sustainable this recovery is," said Gordon Charlop, managing director at Rosenblatt Securities in New York.
One of the Federal Reserve's most dovish policymakers, Chicago Federal Reserve Bank President Charles Evans, told a forum in Bangkok the Fed should loosen policy further with a new round of bond purchases as a way to bring down unemployment.
The president of the Boston Federal Reserve, Eric Rosengren, said at the same event that more quantitative easing is appropriate. Neither is a voting member of the FOMC this year, but both will be in 2013.
Meanwhile, European Central Bank President Mario Draghi kept the door open to further interest rate cuts after the ECB cut its key rate to a record low 0.75 percent last week.
Expectations the US central bank will step in with a third round of quantitative easing pushed Treasury debt prices higher, with benchmark yields hovering above historic lows. The benchmark 10-year US Treasury note was up 9/32 in price at 102-4/32 for a yield of 1.52 percent.
"Economic momentum is trending lower," said Sharon Stark, chief fixed income strategist at Sterne Agee & Leach in Birmingham, Alabama. "Traders are preparing for another round of quantitative easing after three straight months of below-consensus jobs growth."
Oil climbed as talks to resolve a strike in Norway failed over the weekend, raising fears of an imminent shutdown of oil production.
Brent rose $2.06 to $110.25 a barrel and US crude was up $1.61 at $86.06.
