China, US earns, data hit stocks as euro slides
(AP) — Fears of further lending curbs in China and mixed U.S. corporate earnings weighed on world markets Wednesday, while concerns about Greece's debt problems sent the euro sliding an eyecatching two U.S. cents to a five-month low against the dollar.
In Europe, the FTSE 100 index of leading British shares closed down 92.34 points, or 1.7 percent, at 5,420.80, while Germany's DAX slid 124.95 points, or 1.7 percent, at 5,851.53. The CAC-40 was down 80.41 points, or 2.1 percent, at 3,929.26.
On Wall Street, the Dow Jones industrial average was down 188.40 points, or 1.8 percent, at 10,537.03 while the broader Standard & Poor's 500 index slid 18.36 points, or 1.6 percent, at 1,131.87.
Investor sentiment, already downbeat after China's main index dived nearly 3 percent on fears of more monetary tightening there, was dented further by an unspectacular set of U.S. earnings and housing data.
Though some banks, such as Wells Fargo and Bank of New York Mellon, posted fairly solid results, others, like Bank of America and Morgan Stanley, underperformed market expectations. That reinforced fears that the economic recovery will not be as strong as current stock market valuations suggest following a ten month bull run.
Those fears were stoked further by the news that the number of U.S. housing starts unexpectedly fell 4 percent in December to a seasonally adjusted annual rate of 557,000 from an upwardly revised 580,000 in November.
The consensus in the markets was for no change and the fall added to fears that the economic rebound will not be as robust as anticipated, especially as the U.S. housing market was the catalyst to the global recession.
"China tightening, poor housing starts in the U.S. and indifferent banking results have led to a sensible pullback," said David Buik, markets analyst at BGC Partners. "We have not seen one for weeks — way overdue!"
Stocks have been on the retreat all day, largely because of speculation that some of China's banks have been pressured to refrain from any further loans for the rest of the month. That raised fears that China's growth, which has been crucial for the global economy over the last year, may slow sharply.
Beijing has already begun to take steps to rein in stimulus-fueled liquidity, raising reserve requirements for banks and increasing the rate paid on treasury bills.
On Thursday, China will be the world's first major economy to release fourth-quarter gross domestic product figures. Analysts expect economic growth to have remained robust at over 10 percent on an annual basis, and that would underline the need for some monetary tightening.
China's main Shanghai Composite Index dived 95.02 points, or 2.9 percent, to 3,151.85.
Elsewhere in Asia, Hong Kong's Hang Seng index fell 391.81 points, or 1.8 percent, to 21,286.17 while Japan's Nikkei 225 stock average lost 27.38 points, or 0.3 percent, to 10,737.52. Once again, Japan Airlines was in focus, slumping 60 percent to 2 yen after filing for one of the country's largest bankruptcies on Tuesday. JAL shares will be removed from the stock exchange on Feb. 20.
Singapore's market was off 0.7 percent, Taiwan retreated 0.3 percent and Thailand's stock measure lost 0.8 percent.
South Korea's Kospi shrugged off the regional fall, advancing 0.2 percent and Australia's stock measure crept higher by 0.1 percent.
Oil prices fell as fears in the market grew that Chinese demand would be weakened if lending policies are tightened.
Benchmark crude for February delivery slid $1.57 to $77.45 in electronic trading on the New York Mercantile Exchange. The contract rose $1.02 to settle at $79.02 on Tuesday.
The dollar rose modestly to 91.26 yen, while the euro slid 2 U.S. cents over the day to a five-month low of $1.4104 amid concerns about Greece's public debt situation and whether the government will be able to sell enough of its bonds to plug the budgetary hole.
"The uncertainty about the damage this could do to monetary union is ensuring the euro remains under pressure," said Jane Foley, research director at Forex.com.
Currency traders are watching to see if this bout of euro selling turns into a rout, as the currency has dropped below its 200-day moving average — widely considered a key support level — of $1.4297.
Neil Mackinnon, global macro strategist at VTB Capital, noted that since its inception in 1999, the euro has dropped sharply on every occasion it has fallen below its 200-day moving average against the dollar.
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