European stocks fall as US growth worries linger

[August 13, 2010]  LONDON (AP) -- European markets brushed aside stronger than anticipated economic growth figures to trade modestly lower Friday as investors turned their attention toward U.S. retail sales data due later for clues on how consumer spending in the world's largest economy is holding up.

The FTSE 100 index of leading British shares was down 4.71 points, or 0.1 percent, at 5,261.35 while Germany's DAX fell 34.26 points, or 0.6 percent, to 6,100.91. The CAC-40 in France was 12.04 points, or 0.3 percent, lower at 3,609.03.

The falls came despite the news that the eurozone economy grew by a quarterly rate of 1 percent in the second quarter of the year. The increase was largely due to a whopping 2.2 percent expansion in Germany.

Analysts said the figures were impressive but were backward-looking. Since the second quarter of the year ended, the main concern in markets is that the global economic recovery is being threatened by a slowdown in the U.S.

In that context, U.S. retail sales figures for July later will be closely watched -- the consensus in the markets is that they rose a monthly 0.4 percent.

U.S. retail sales are particularly important because they shine a light on the state of private consumption, a key driver of growth -- it accounts for around 70 percent of the world's largest economy. The consensus in the markets is that they rose a monthly 0.4 percent.

"Critically, any dip into negative territory for the sales figures could be precisely the sort of news to initiate another wave of selling on Wall Street, with the impact being felt in Europe too ahead of the weekend break," said Anthony Grech, head of research at IG Index.

U.S. stocks are poised to open lower though that will depend on the retail sales figures. Dow futures were down 20 points at 10,251 while the broader Standard & Poor's 500 futures fell 2.7 points at 1,072.40

It's been a very volatile week for stock markets as fears about the global economic recovery have mounted following a warning from the Fed that the U.S. economy is slowing down. There's also increasing evidence that China will not be able to pick up the slack from lower U.S. growth.

Those fears have had a major impact in the currency markets and the dollar has been the main beneficiary, as it garners support from its status as a safe haven asset. The Japanese yen is also widely considered a safe haven.

By late morning London time, the euro was flat at $1.2826, around five cents below where it was earlier this week. The dollar was 0.3 percent lower at 85.63 yen -- on Wednesday the dollar had fallen to a 15-year low of 84.75 yen.

The yen's recent strength has hit Japanese share prices hard as investors fret about the potential negative impact on exporters.

On Friday, the Nikkei 225 stock average added 0.4 percent to 9,253.46 but the Hang Seng index shed 0.2 percent to 21,071.57 after a day of back and forth trade.

Elsewhere in Asia, South Korea's Kospi gained 1.4 percent to 1,746.24 and the Shanghai Composite index rose 1.2 percent to 2,606.70. An advance in metals prices triggered buying in miners, which helped push Australia's S&P/ASX 200 up 1.3 percent to 4,459.60. BHP Billiton Ltd. jumped nearly 2 percent.

Benchmark crude for September delivery was up 61 cents at $76.35 a barrel in electronic trading on the New York Mercantile Exchange. The contract slid $2.28 to settle at $75.74 on Thursday.

[Associated Press]

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