World stocks weighed down by Alcoa disappointment

(AP) — World stock markets mostly fell Tuesday after aluminum company Alcoa Inc. kicked off the fourth quarter U.S. corporate reporting season with disappointing earnings and China tightened monetary policy once again.

In Europe, the FTSE 100 index of leading British shares was down 75.19 points, or 1.4 percent, at 5,462.88 while Germany's DAX fell 82.49 points, or 1.4 percent, to 5,958.01. The CAC-40 in France was 43.77 points, or 1.1 percent, lower at 3,999.32.

On Wall Street, the Dow Jones industrial average was down 54.411 points, or 0.5 percent, at 10,609.58 soon after the open while the broader Standard & Poor's 500 index slipped 7.12 points, or 0.6 percent, to 1,139.86.

Sentiment has been dented all day by below-forecast earnings from Alcoa, the world's biggest aluminum producer. The company reported earnings, after stripping out exceptional items, of only 1 cent a share — short of the 5 cents predicted in the markets — amid higher metals prices and falling revenues.

"The earnings session has kicked off with a disappointment from Alcoa knocking sentiment in stock markets lower," said Jane Foley, research director at Forex.com.

With economic data this week on the light side, attention will continue to focus on earnings statements to see if the increasing optimism on Wall Street, that has seen stocks enjoy a ten-month bull run, is justified by the fundamentals.

The key driver to stock market performance, at least in the first part of the year, will likely be whether economic and corporate figures, particularly out of the U.S., back up the optimism that is evident in company valuations.

Stock markets around the world have rallied strongly since March's lows as investors grew more optimistic about the global economic recovery after central banks and governments pushed through extraordinary policy measures to mitigate the deepest recession since World War II.

Investors are particularly interested to see if companies' sales are improving — that would provide clear evidence that the global economic recovery is on a solid footing and that earnings can be lifted by more than just cost-cutting.

Overall, Steven Ricchiuto, chief economist at Mizuho Securities, reckons the earnings season "should be constructive" for stocks as expectations are for only a 1-2 percent quarter-over-quarter rise in adjusted earnings per share.

Earlier, most Asian stock markets declined, though China's Shanghai index jumped 61.22 points, or 1.9 percent, to 3,273.97 despite the news that People's Bank of China is raising its required reserve ratio for commercial banks by 50 basis points from next Monday. The higher reserve requirement follows a more hawkish tone by central bank officials, modest yield increases in bill sales, and could pave the way for an actual rise in borrowing costs.

"Interest rate hikes will follow but they will be limited by concerns over the durability of the economic recovery," said Mark Williams, senior China economist at Capital Economics.

Japan's Nikkei 225 stock average, which was closed for a public holiday on Monday, ended 80.82 points, or 0.8 percent, higher at 10,879.15. The advance in Japan came about even though Japan Airlines, Asia's largest carrier, dived 45 percent to a new record low amid fears it will file for bankruptcy protection.

Hong Kong Hang's Seng, meanwhile, dropped 84.88 points, or 0.4 percent, to 22,326.64 and Australia's benchmark slid 1 percent. South Korea's Kospi advanced 0.3 percent to 1,698.64.

Elsewhere, Singapore's market lost 0.5 percent and Taiwan retreated 0.2 percent

In oil markets, benchmark crude for February delivery was down $1.06 to $81.46 a barrel in electronic trading on the New York Mercantile Exchange. On Monday, a weakening U.S. dollar helped push the contract to a 15-month high near $84 a barrel before it settled down 23 cents at $82.52.

The dollar fell 1.1 percent to 91.15 yen but was stronger against the euro, which was trading down 0.2 percent at $1.4489.

The euro has been undermined by fresh concerns over Greece's ability to cut its budget deficit to 3 percent of gross domestic product in 2012 after an editorial in the Financial Times newspaper argued the case in favor of Greece leaving the euro zone and EU officials warned about irregularities in the country's budget statistics.

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AP Business Writer Jeremiah Marquez in Hong Kong contributed to this report.