World markets fall on signs of fitful US recovery

[August 04, 2010]  LONDON (AP) -- World stocks mostly fell Wednesday after more disappointing economic news reinforced concerns about the U.S. economic recovery ahead of crucial jobs data at the end of the week.

In Europe, the FTSE 100 index of leading British shares was down 68.21 points, or 0.3 percent, at 5,328.27 while Germany's DAX fell 36.21 points, or 0.6 percent, to 6,271.70. The CAC-40 in France was down 26.69 points, or 0.7 percent, to 3,720.82.

Wall Street was poised for modest declines at the open after slipping Tuesday following downbeat pending home sale, factory orders and consumer spending figures. Dow futures were down 28 points, or 0.3 percent, at 10,566 while the broader Standard & Poor's 500 futures fell 4.60 points, or 0.4 percent, to 1,113.70.

Despite a fairly encouraging U.S. manufacturing survey on Monday, the latest data out of the U.S. has been disappointing. Further insights will be forthcoming later when the Institute for Supply Management publishes its monthly services sector survey and the private payrolls firm ADP reveals its employment statistics for July.

The ADP survey in particular will be eyed in the context of Friday's official U.S. non-farm payrolls data for July. The payrolls figures often set the market tone for a week or two, particularly in August, when trading volume slumps as some investors go on vacation.

"The potency of data for the market is particularly strong at the moment," said Daragh Maher, an analyst at Credit Agricole. "In part, this is due to talk of a double-dip (recession) in the U.S. which has lent any soft data particular prominence but it is also because there is a new sense of urgency as to what this might mean for policy."

If the payrolls data come in below expectations for an increase in jobs of around 100,000, then the markets will be on the lookout for additional money-boosting measures from the Federal Reserve, though many economists doubt that the rate-setting panel will decide to get anything done so quickly.

If the Fed turns on the taps once again, then most currency strategists think the dollar will be undermined further, after falling to a four-month low against the euro on Tuesday.

By late morning London time, the euro was down 0.3 percent at $1.32. On Tuesday, it went as high as $1.3261.

While the dollar has been pressured by the evidence showing the U.S. economy is losing momentum, the euro has recovered its poise as the government debt crisis has eased and the economic news flow out of the 16 countries that use the currency has generally outperformed expectations.

"What is clear is that the focus of concerns has moved very clearly from the eurozone towards the U.S." said Simon Derrick, senior currency strategist at Bank of New York Mellon.

One sector that stubbornly fails to match the improvements seen elsewhere, though, is consumer spending.

Eurostat, the EU's statistics office, said retail sales in the eurozone were flat in June from the previous month, down from a 0.4 percent rise booked in May. June's outcome was in line with expectations after figures showed that sales in Germany and France fell sharply, and means retail sales were only 0.4 percent higher in June than the year before.

The figures came out a day ahead of the European Central Bank's expected decision to leave its key interest rate unchanged at 1 percent. Though its president Jean-Claude Trichet is expected to sound a more optimistic tone in his press conference, he is likely to point to the hurdles the eurozone economy faces, not least the fact that consumers are holding back from major purchases even though separate figures last week showed consumer confidence running at a 26-month high.

The worry is that consumer spending may get pressured by the austerity measures being enacted across the eurozone in response to the government debt crisis.

Earlier, stock markets in Asia had been mixed.

While Japan's Nikkei 225 stock average closed own by 204.67 points, or 2.1 percent, to 9,489.34, the Shanghai Composite Index added 0.4 percent to 2,638.52 and Hong Kong's Hang Seng advanced 0.4 percent to 21,549.88.

Other gainers included India, Taiwan and Malaysia. Markets in Singapore, Indonesia, New Zealand and Australia lost ground.

Benchmark crude for September delivery was down 65 cents to $81.90 a barrel in electronic trading on the New York Mercantile Exchange. The contract gained $1.21, or 1.5 percent, to settle at $82.55 on Tuesday.

[Associated Press; By PAN PYLAS]

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