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GLOBAL MARKETS-Shares sink on ‘fiscal cliff,’ Europe recession; oil up

by on November 15, 2012 6:13 pm BST
 

Thu Nov 15, 2012 1:13pm EST

* World equity markets extend decline for seventh day

* Debt crisis sends euro zone back into recession

* Middle East tensions support oil prices, Brent hits $111

* Yen sinks to 6-1/2-month low vs U.S. dollar

By Ellen Freilich and Herbert Lash

NEW YORK, Nov 15 (Reuters) – Global stocks fell for a
seventh day on Thursday after data showed the euro zone entered
a recession in the third quarter and on fear of the U.S. “fiscal
cliff,” while oil prices gained on growing concerns about
violence in the Gaza Strip.

Brent crude prices rose toward $111 a barrel as a second day
of fighting in the Gaza Strip sparked worries of an escalation
that could ultimately disrupt oil supplies from the Middle East.

A Hamas rocket killed three Israelis north of the Gaza
Strip, drawing the first blood from Israel, as the Palestinian
death toll rose to 15 in a military showdown lurching closer to
all-out war and a threatened invasion of the enclave.

Benchmark Brent crude rose $1.05 to $110.66 a
barrel.

“I have a hard time seeing (oil) prices falling back much at
the moment, at least while tension is still high,” said Filip
Petersson, an analyst at SEB in Stockholm.

“We would probably need to hear some kind of statements that
indicate the Israelis are stepping down, but I think that’s
unlikely to happen at the moment.”

U.S. stocks fell in choppy trading, with the S&P500 stock
index down for a third day after Wal-Mart Stores Inc,
the world’s biggest retailer, reported disappointing quarterly
sales and on concerns about the U.S. government’s budget woes
may slow 2013 economic growth.

U.S. stocks have struggled to hold onto gains in recent days
as investors fret the economy could slip into recession if no
deal is reached to avoid the “fiscal cliff” – some $600 billion
in spending cuts and tax hikes that take effect in January.

The S&P500 index is down about 2.0 percent for the week so
far.

At midsession, the Dow Jones industrial average was
down 43.96 points, or 0.35 percent, at 12,526.99. The Standard &
Poor’s 500 Index was down 4.36 points, or 0.32 percent,
at 1,351.13. The Nasdaq Composite Index was down 14.34
points, or 0.50 percent, at 2,832.47.

Shares of Wal-Mart fell 3.7 percent to $68.69 after the
retailer reported quarterly sales rose 3.4 percent, below
analysts’ expectations, as it cited weakness in China and Japan,
as well as in the United States.

Disappointing economic data also weighed on stocks and U.S.
oil prices, which fell $1.35 to $84.97 a barrel.

Hurricane Sandy in the U.S. North East drove new claims for
jobless benefits to a 1-1/2 year high last week, a sign the
deadly storm could hold back economic growth by leaving tens of
thousands of people temporarily out of work.

A drop in the Philadelphia Federal Reserve’s index of
business activity in the U.S. mid-Atlantic region was also tied
to the impact of Sandy, which disrupted business in the area due
to power outages and commuting problems for workers.

EUROPE BACK IN RECESSION

In Europe, stocks ended lower, with a key index hitting a
two-month low on the economic data.

The FTSEurofirst 300 index of top European shares
closed 0.9 percent lower at 1,078.64 points, a level not seen
since early September.

“The global economy faces some severe headwinds. Against
that backdrop we see short-term de-risking of portfolios,” said
Abi Oladimeji, head of investment strategy at Thomas Miller
Investment.

Economic growth in Germany, Europe’s largest economy, cooled
to 0.2 percent over the July-September period compared with the
previous three months, while data showed the wider 17-nation
euro zone has slipped back into recession.

But output in the euro area as a whole fell 0.1 percent in
the third quarter after falling 0.2 percent in the April to June
period, making it the second recession since 2009.

“The double-dip is a fact,” said Martin Van Vliet, an
economist at ING Bank. “What you notice is that the recession in
southern Europe is slowly creeping to other countries.”

World stocks were on course for a seventh successive day of
losses. MSCI’s world equity index fell 0.5
percent at 317.04 points and has now lost over 3.0 percent this
month.

The yen tumbled to its lowest level against the U.S. dollar
since late April after the leader of Japan’s main opposition
party called for a move toward negative interest rates, sapping
the currency’s appeal despite its safe-haven status.

Against the yen, the dollar was up 1.02 percent at
81.06.

The euro rallied to a two-week high against the yen and also
rose against the dollar, despite the gloomy economic data for
the euro zone.

The euro was up 0.32 percent at $1.2775.

U.S. Treasury debt prices rose slightly in safe-haven buying
amid worries over a looming fiscal crisis and the relatively
poor overall health of the U.S. economy.

The benchmark U.S. Treasury 10-year note was up
2/32 in price to yield 1.5826 percent.