GLOBAL MARKETS-Economy fears hit shares; US$ at new two-year low, bonds rally

NEW YORK: Fears about the world economic outlook hurt global shares
on Thursday as the euro fell to a new two-year low and investors pushed
into safe-haven U.S. government bonds.
U.S. benchmark debt
yields neared historic lows as prices extended gains in the afternoon
after the sale of $13 billion of reopened 30-year Treasury bonds
brought a record low auction yield.
Jitters about what the euro
zone crisis and softer economy will mean for company profits bruised
Wall Street, though stocks came off their lows on a rally in Procter & Gamble.
"The (bond) price strength continues," said Mary Ann Hurley, vice president for fixed income trading at D.A. Davidson & Co in Seattle.
"Europe
unquestionably continues to be a factor, but now the viewpoint is
shifting to one that the global economy is slowing down greatly and
that many central banks are going to have to conduct additional
(monetary) easing moves."
There was some solace from data that
showed the number of Americans applying for jobless benefits fell last
week to a four-year low, though some of that improvement may be
temporary.
But analysts said it did little to sway the view the economic recovery has hit a soft patch.
The
weaker-than-expected start to the second-quarter U.S. corporate
reporting season, combined with expectations of slower economic growth
in the world's leading economies, had encouraged hopes the Federal
Reserve would resume a policy of creating money to lower long-term
interest rates, known as quantitative easing, or QE3.
A surprise
rate cut in South Korea on Thursday following a 50-basis-point cut by
Brazil o n W ednesday evening also underscored the growing impact the
slowdown was having worldwide.
But the lack of monetary easing by the Bank of Japan
on T hursday and limited clues in the latest minutes from the Fed's
June policy meeting, released on We dnesday, suggest central banks are
still cautious about the need for further easing.
The Fed
minutes showed the world's biggest economy would have to weaken further
before its central bank takes any more easing steps. The minutes did,
however, show some officials felt more stimulus was justified.
The dimmed hopes for fresh stimulus in the near-term also undermined market sentiment.
"The
consensus of the market is it's still on table. What is unknown is the
trigger for a QE3 move from the Fed," said Bucky Hellwig, senior vice
president at BB&T Wealth Management in Birmingham, Alabama.
The euro fell 0.3 percent to $1.2205, after an earlier drop to $1.2165 on Reuters data, the weakest since the end of June, 2010.
The
greenback benefited from its safety appeal and the dollar index, which
tracks the greenback versus a basket of six currencies, rose to 83.829,
the highest since July, 2010. It was last up 0.1 percent at 83.608
EQUITIES SHUNNED
The
FTSE Eurofirst 300 index ended down 1 percent, while the MSCI world
equity index was down 1.1 percent, its seventh day of declines in a row.
The Dow Jones industrial average slipped 31.26 points, or 0.25 percent, to 12,573.27.
The Standard & Poor's 500 Index fell 6.69 points, or 0.50 percent, to 1,334.76.
The Nasdaq Composite Index lost 21.79 points, or 0.75 percent, to 2,866.19.
Technology shares have been among the worst performers recently, bogged down by profit warnings from companies such as Advanced Micro Devices Inc and Applied Materials Inc . For the month, the S&P technology sector is down 3.5 percent and the PHLX semiconductor sector has lost 8.2 percent.
"I
think it is the fear that technology companies are going to miss
estimates" this earnings period, said Bruce Zaro, chief technical
strategist at Delta Global Asset Management in Boston.
Benchmark
10-year notes were trading 11/32 higher in price to yield 1.48 percent,
down from 1.52 percent late Wednesday. The 10-year yield is within
striking distance of the 1.44 percent level touched in early June,
which is the lowest going back to the early 1800s, based on data
gathered by Reuters.
Oil prices turned around in afternoon
trading, with Brent crude jumping above $101 a barrel after the United
States announced it was tightening sanctions against Iran.
Brent
crude oil shot up to a session high of $101.36 a barrel and was
recently up 53 cents at $100.76. U.S. crude ended up 27 cents to settle
at $86.08 a barrel.
But gold failed to benefit
from the flight to safety as it was hurt by the rise in the dollar.
Spot gold was down 0.6 percent at $1,567.02 an ounce. U.S. COMEX gold
futures for August delivery settled down $10.40 at $1,565.30 an ounce. - Reuters
Later Reuters reported
NEW
YORK (Reuters) - U.S. stocks fell on Thursday, hit by more warnings in
the technology sector, while a rally in Procter & Gamble helped the blue-chip Dow cut its loss.
Shares of consumer products giant Procter & Gamble
rose 3.7 percent to $63.70 after a source said activist investor
William Ackman appears to be building a stake in the U.S. household
products company. Despite the support, the Dow ended lower for a sixth
day.
Tech shares remained under pressure, with the
S&P technology sector index down 3.5 percent for the month so far.
Indian IT heavyweight Infosys Ltd
became the latest big tech company to warn of sluggish sales, saying
global economic uncertainty was hitting technology spending.
U.S.-listed shares of Infosys slid 11.2 percent to $38.75, after earlier dropping to an all-time low of $38.12.
"I
think it is the fear that technology companies are going to miss
estimates" this earnings period, said Bruce Zaro, chief technical
strategist at Delta Global Asset Management in Boston.
Profit warnings from companies such as Advanced Micro Devices Inc have hurt the sector in recent days. The S&P tech sector index <.GSPT> ended Thursday down 1.1 percent.
All
three major U.S. stock indexes recovered from their lows of the day,
with the S&P 500 bouncing off its 50-day moving average at 1,334
and the Dow briefly trading higher after hitting technical support at
12,500, analysts said.
Merck & Co.
shares also bolstered the Dow. Merck's stock rose 4.1 percent to $42.91
after a pivotal trial of Merck's experimental osteoporosis drug
odanacatib has shown that it reduces the risk of fracture.
The
Dow Jones industrial average <.DJI> shed 31.26 points, or 0.25
percent, to 12,573.27 at the close. The Standard & Poor's 500 Index
<.SPX> shed 6.69 points, or 0.50 percent, to 1,334.76. The Nasdaq
Composite Index <.IXIC> lost 21.79 points, or 0.75 percent, to
close at 2,866.19.
The Dow has lost 2.9 percent since its close on July 3.
Overall
market sentiment was weak, especially after the lack of any monetary
easing by the Bank of Japan on Thursday, and few clues on Wednesday in
the minutes from the Federal Reserve's June policy meeting. The lack of
policy moves suggested major central banks were still cautious about
the need for further easing.
On the earnings front, Bank of America Merrill Lynch
Global Research lowered its forecast on the S&P 500's 2012 earnings
per share to $102 from $103.50, and for 2013, to $109 from $110.50.
The
forecasts were cut "to reflect the impact of lower commodity prices and
slower global growth on corporate profits," BofA Merrill Lynch Global
Research analysts said in a note.
Hotel operator Marriott International Inc
reported a higher quarterly profit after Wednesday's close, but cut its
fee revenue forecast due to weakness in some international markets. Its
stock slid 6.4 percent to $35.58.
Data on the economy
showed some promising signs, however. Initial claims for state
unemployment benefits in the United States dropped to the lowest in
four years.
Other economic data showed U.S. June import prices
fell 2.7 percent, the most in more than three years, due to a plunge in
the cost of imported oil, further icing inflation pressures.
Volume
was a bit lighter than average. About 6.46 billion shares changed hands
on the New York Stock Exchange, the Nasdaq and Amex, compared with the
year-to-date daily average of 6.85 billion shares.
Decliners beat advancers by a ratio of about 19 to 11 on the NYSE and on the Nasdaq, by about 3 to 2. - Reuters