Global Shares, U.S. Futures Slide on Earnings Worries

Published October 26, 2012

| Reuters

European share markets followed Asian stocks lower as lackluster corporate earnings reports undermined investor confidence ahead of American growth data due later on Friday.

Gloomy earnings and outlook statements from global giants such as Apple and Amazon, and European firms Renault and Gucci have steadily corroded the hopes of a recovery in the global economy.

The FTSE Eurofirst 300 index of top European shares was down 0.6 percent in early trading with London's FTSE 100 , Paris's CAC-40 and Frankfurt's DAX all around 0.4 to 0.6 percent lower.

Efforts by the world's major central banks to boost activity and draw a line under the euro zone debt crisis, along with signs of a recovery in the U.S. economy, have supported a strong rally in global equity markets this year.

But investors want to see that recovery confirmed by the U.S. GDP data, especially with uncertainty growing over the budget problems in Washington, known as the fiscal cliff, which could depress business activity early next year.

"What you have now is no additional oomph coming from the central bankers and you have the data seeming to weaken if you look at the more recent evidence," said William De Vijlder, chief investment officer at BNP Paribas Investment Partners.

"On top of that you have the never ending story of what is going to happen to the (fiscal) cliff, so that is not an environment where people, would say let's now go for equities."

The MSCI world equity index was down 0.4 percent on Friday at 328.08 points and on track for a loss of 1.8 percent this week, but is still up an impressive 9.5 percent for the year to date.

U.S. stock index futures also pointed to a lower open on Wall Street on Friday though here the broad S&P 500 index is holding onto gains of over 12.3 percent so far in 2012.

MODEST GROWTH HOPES

The U.S. third quarter GDP data, due at 1230 GMT, is expected to show that the world's biggest economy is expanding at a sluggish annual rate of 1.9 percent, according to a Reuters survey of economists.

The modest expansion is still seen as falling short of what is needed to make much of a dent in unemployment, and will offer little cheer for the White House a little more than a week before the Nov. 6 presidential election.

Ahead of the GDP data, commodity markets were all sliding, reflecting the concern that any growth coming from the U.S. will struggle to offset the slowdown caused by Europe's debt crisis and its effects on Asia's giant export industries.

Brent crude slipped 65 cents to $107.83 a barrel extending its losses to more than 3 percent this month with investors also reluctant to build up positions ahead of the U.S. elections.

Gold dropped more than half a percent and was headed for its third week of declines to $1,703 an ounce.

In the currency markets the focus was more on Japan where markets are gearing for the central bank to ease policy next week, which would be the first time it has taken action for two months in a row since 2003.

The dollar was actually down 0.5 percent at 79.95 yen as traders cut positions ahead of the GDP report, but is on track to end the week higher, adding to last week's gains of 1.1 percent.

The Bank of Japan is seen easing monetary policy next week by expanding asset purchases and it may even make a stronger commitment to boost inflation to try to keep the world's third-largest economy from sliding into recession.

After drifting lower for much of this week, the euro looked set to finish weaker, its outlook clouded by uncertainty about when Spain will request a bailout that could trigger the European Central Bank's bond-buying programme.

The single currency was flat at $1.2930, well off its Oct. 17 high of $1.3140.

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