0 comments

GLOBAL MARKETS-Shares fall, dollar rises, amid earnings gloom

by on October 10, 2012 3:50 am BST
 

Tue Oct 9, 2012 11:50pm EDT

* Nikkei down 1.7 pct, MSCI Asia ex-Japan down 0.6 pct

* U.S. stocks fell 1 pct, Intel off 2.7 pct after downgrades

* Euro falls 0.2 percent to around $1.2850

* Brent crude drops below $114 a barrel

By Alex Richardson

SINGAPORE, Oct 10 (Reuters) – Asian shares fell on
Wednesday, with Japan’s stocks sliding more than 1.5 percent to
a two-month low, and the safe-haven dollar firmed on concerns
that the corporate results season will reveal weaker earnings in
the face of flagging global economic growth.

Equity markets have been rallying since hitting their 2012
low in early June, with action from major central banks to
support fragile economies giving a renewed lift last month, but
caution has set in as the third quarter results season begins.

“History is not on the side of those who expect the market
to continue to prosper once the earnings cycle has turned,” said
John Higgins, senior markets economist at Capital Economics, in
a note.

The euro slipped, with a rise in Spanish bond yields as
Madrid keeps markets guessing over whether it will request an
international bailout and violent protests greeting German
Chancellor Angela Merkel on a visit to Greece underlining how
far the region’s debt crisis is from resolution.

Growth-sensitive commodities such as oil and copper and
currencies like the Australian dollar were under pressure, while
the retreat from riskier assets boosted safe-haven government
debt, with Japanese government bonds (JGB) following U.S.
Treasuries higher.

Japan’s Nikkei share average fell 1.9 percent, while
MSCI’s broadest index of Asia Pacific shares outside Japan
fell 0.5 percent.

U.S. stocks fell around 1 percent on Tuesday, with
shares of Intel, the world’s largest semiconductor maker, losing
2.7 percent after downgrades from at least two brokerages. S&P
500 futures traded in Asia slipped 0.2 percent.

Asian technology stocks were hit by Intel’s weakness, with
the tech sub-index the biggest drag on the MSCI
Asia ex-Japan with a 1 percent decline. South Korean heavyweight
Samsung Electronics fell 2.0 percent.

EARNINGS WARNINGS

Companies including FedEx Corp, Caterpillar Inc
and Hewlett-Packard Co have warned about
earnings, citing weak demand in Europe and China.

Thomson Reuters data shows analysts expect quarterly
earnings for S&P 500 companies to decline about 2.3 percent from
the year-ago period, the first fall in three years.

The International Monetary Fund said in its semi-annual
check on the world’s financial health on Wednesday that the euro
area’s debt crisis was the main threat and the risks to global
financial stability had risen in the last six months, leaving
confidence “very fragile”.

The report adds to the gloomy backdrop ahead of the IMF’s
meeting to be held in Tokyo later this week. On Tuesday, the
Fund said the global slowdown was worsening and cut its growth
forecasts for the second time since April.

Mounting pessimism about the corporate and macroeconomic
outlook drove investors towards government debt, with the
10-year JGB yield falling half a basis point to 0.765 percent,
following a fall in benchmark Treasury yields on Tuesday.

The euro fell 0.2 percent to around $1.2850, while
the dollar rose by a similar percentage against a basket of
major currencies.

“Currencies will generally take their cue from stocks,” said
Junya Tanase, chief FX strategist at JPMorgan Chase. “Markets
overnight turned against risk and whether that will be reversed
will depend on how equities react to U.S. third-quarter earnings
results.”

Oil fell, with Brent crude dropping nearly 60 cents
to below $114 a barrel, as growth worries overcame the supply
concerns driven by tensions in the Middle East that had been
pushing crude higher in recent days.

“Oil has been falling as investors weigh supply risks
against weaker demand,” said Ben Le Brun, a market analyst at
OptionsXpress in Sydney. “A lot of growth expectations are being
revised down, especially in China.”

Copper and gold prices were steady.