World stocks down ahead of Citigroup earnings

[February 04, 2010]  LONDON (AP) -- World stock markets fell Tuesday as Japan Airlines filed for bankruptcy protection and investors awaited a raft of fourth-quarter U.S. corporate earnings with a degree of unease following a fairly mixed start to the results season.

In Europe, the FTSE 100 index of leading British shares was down 47.77 points, or 0.9 percent, at 5,446.62 while Germany's DAX fell 49.39 points, or 0.8 percent, at 5,869.16. The CAC-40 was 35.12 points, or 0.9 percent, higher at 3,,942.34.

Wall Street was poised for a subdued start to the week after being closed Monday for the Martin Luther King public holiday. Dow futures were down 13 points, or 0.1 percent, at 10,550 while the broader Standard & Poor's 500 futures fell 1.2 point, or 0.1 percent, to 1,131.10.

In the run-up to Wall Street's open, investors will be turning their attention to the next batch of fourth quarter corporate earnings -- so far, earnings have been fairly mixed, with upside surprises from the likes of Intel Corp. offset by disappointments elsewhere, most notably Alcoa Inc.

Banks will be in the spotlight most of the week especially after U.S. stocks fell 1 percent on Friday -- the Dow Jones industrial average suffered its worst day of the year so far -- as JP Morgan Chase & Co. offered a cautious earnings guidance even though it reported a fairly strong set of results.

Citigroup Inc. will take center stage Tuesday, to be followed later in the week by others including Goldman Sachs Group Inc., Bank of America Corp. and Morgan Stanley.

Michael Hewson, an analyst at CMC Markets, said investors will be paying particular attention to loan loss provisions at Citigroup and any comments on possible further write downs.

Over the week, 65 companies in the S&P 500 post their results this week, constituting about a fifth of the S&P's total value. As well as the banks, earnings from Google Inc., IBM Corp. and McDonald's Corp. will be closely monitored.

Though attention is primarily on the U.S., investors in Europe have had plenty of news to digest.

On the corporate front, Kraft Foods Inc. finally succeeded in persuading Cadbury PLC's board to accept and recommend to shareholders a takeover offer after improving its bid to $19.5 billion.

Cadbury topped the list of risers on the FTSE 100, gaining just under 4 percent to 837 pence a share, more or less in line with the offer price of 840 pence a share.

On the economic front, investors in Britain were surprised to hear that the inflation rate rose by a full percentage point to 2.9 percent in December -- just shy of the level at which the Bank of England has to write a letter to the British finance minister explaining why inflation was overshooting the 2 percent target by more than one percentage point.

Analysts said higher than expected inflation in Britain would likely mean that the Bank of England will not be pumping any further money into the economy and that it may start raising interest rates sooner than anticipated. All eyes will be on governor Mervyn King later when he gives one of his major setpiece speeches of the year.

The pound was marked higher following the inflation news, rising as high as $1.6457, its strongest level for over a month. By mid-morning in London, it was up 0.4 percent at $1.64.

The euro, meanwhile, was hit by news that German investor confidence has slipped by more than expected in January, partly because of ongoing concerns over the automobile and construction sectors.

The ZEW institute said its main investor confidence index fell to 47.2 points in January from December's 50.4. The consensus in the markets was for a far more modest decline to around 50.

"Although the statement made no explicit mention of the situation in Greece, we suspect that Greek default concerns may have weighed on the index as well," said Frederik Ducrozet, eurozone economist at Calyon Credit Agricole.

Earlier in Asia, Japan's Nikkei 225 stock average slipped 90.18 points, or 0.8 percent, to 10,764.90.

After the market closed, Japan Airlines filed for bankruptcy, ending months-long speculation about its fate and launching a massive overhaul to shed the fat and inefficiency that hobbled Asia's biggest airline.

JAL shares, which have lost more than 90 percent of their value over the last week, tumbled 20 percent Tuesday to 4 yen before finishing flat at 5 yen. The company is now essentially worthless, with a market capitalization of about 10.9 billion yen ($120 million) -- less than the price of one Boeing 787 jet.

Elsewhere, Hong Kong's Hang Seng gained 217.97, or 1 percent, to 21,677.98 and China's Shanghai index edged up 9.78 points, or 0.3 percent, to close at 3,246.87.

Most other Asian markets fell. South Korea's Kospi lost 0.1 percent to 1,710.22, Australia's market shed 1 percent and Taiwan retreated 1.1 percent.

Oil prices rose above $78 before retreating in late afternoon trade. Benchmark crude for February was down 42 cents to $77.58 in electronic trading on the New York Mercantile Exchange.

[Associated Press; By PAN PYLAS]

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

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