World stocks recover some losses on US data

LONDON — World stocks recovered some ground Friday after data showed that the U.S. economy growing at a steady but slow rate, reinforcing expectations that the Federal Reserve will provide further stimulus.

By (AP)

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Published: Fri 29 Oct 2010, 7:58 PM

Last updated: Mon 6 Apr 2015, 11:46 AM

The world’s largest economy expanded by an annual 2 percent in the third quarter. That is an improvement from the previous quarter’s 1.7 percent rate, though it is still well below the pace needed to create jobs and fuel a sustainable recovery.

After previously trading lower, Britain’s FTSE 100 index was flat at 5,678.92 and France’s CAC-40 was 0.1 percent higher at 3,839.45. Germany’s DAX gained 0.2 percent to 6,610.71.

Asian markets earlier closed lower while Wall Street slid less than expected on the open. The Dow Jones industrial average was down 0.3 percent at 11,086 and the S&P 500 was 0.2 percent lower at 1,181.

The U.S. GDP figure was in line with most analysts’ expectations and showed an underlying recovery in domestic demand and consumer spending, an encouraging sign as it is a key part of the economy.

On the negative side, business investment slowed and exports were somewhat disappointing, analysts said. Crucially, the 2 percent growth rate is still too low to suggest a durable recovery.

“The economy isn’t growing rapidly enough to reduce the unemployment rate,” said Paul Ashworth, senior economist at Capital Economics.

As a result, investors are convinced that the Fed will unveil more stimulus measures next week.

The central bank is expected to buy Treasury bonds, known as quantitative easing, in a bid to drive interest rates lower, encourage lending and stimulate the U.S. economy.

“The market remains fixated on the size of the quantitative easing,” Singapore’s DBS bank said in a report.

DBS said it expects the Fed to announce initial bond purchases of between $200 billion and $300 billion while some investors are looking for a program between $500 billion and $1 trillion.

“Herein lies the fear for disappointment,” DBS said.

The details of any stimulus are expected to be announced when the Fed meeting wraps up Nov. 3.

In Europe, economic data suggested the recovery is unbalanced and slow. The official inflation rate for the 16-country eurozone rose to 1.9 percent in October, according to statistics agency Eurostat. The unemployment rate, meanwhile, rose to a 12-year high of 10.1 percent in September as strength in Germany’s labor market was offset by weakness elsewhere.

The focus on economic indicators comes after investors digested a raft of corporate earnings this week. The reports were mostly upbeat, though many companies warned that the outlook is difficult.

On Friday, British Airways reported its first profit in 3 years, helped by cost-cutting and a recovery in business travel, while Total’s earnings jumped on a rise in oil prices and production.

In Asia, the Nikkei 225 stock average closed down 1.8 percent at 9,202.45. Investor sentiment was undermined by a stronger yen, which hurts exporters as it cuts the value of their repatriated profits. The dollar slumped below 81 yen, nearing a post World War II record low of 79.75 yen set in 1995.

Adding to the gloom, Japan’s industrial production fell for the fourth straight month in September, underscoring the country’s fragile recovery. Factory output tumbled 1.9 percent from the previous month as makers of cars and electronic devices cut production, much worse than a 0.6 percent fall forecast by analysts.

South Korea’s Kospi lost 1.3 percent to 1,882.95. Australia’s S&P/ASX 200 fell 0.5 percent to 4,661.60.

The benchmark Shanghai Composite Index dropped 0.5 percent to 2,978.83 and Hong Kong’s Hang Seng shed 0.5 percent to 23,096.32.

Shares in India, Taiwan and Indonesia also declined while Singapore and Malaysia gained.

In currencies, the dollar fell to 80.76 yen from 81.04 yen in New York late Thursday. The euro slipped to $1.3877 from $1.3925.

Benchmark oil for December delivery down 26 cents at $81.92 a barrel in electronic trading on the New York Mercantile Exchange. The contract added 24 cents to settle at $82.18 a barrel on Thursday.

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