World stocks lower as earnings disappoint

[October 26, 2010]  LONDON (AP) -- World markets were lower Tuesday as European corporate earnings mostly left investors disappointed ahead of more releases from the U.S. and Asia.

Although many companies are reporting fairly healthy profits for the last quarter, their outlook is often dampened by expectations of an economic slowdown, particularly in Europe, where households are becoming cautious about spending and governments are making sharp austerity cuts.

Germany's DAX index was down 0.3 percent at 6,622.92 and France's CAC-40 was 0.7 percent lower at 3,842.89.

In Britain, the FTSE 100 index was down 0.7 percent at 5,711.49 despite a report showing the economy there grew twice as fast as expected in the third quarter. While that figure may delay any extra stimulus measures from the Bank of England, economists agree that growth will weaken in the future, particularly since the government recently announced the sharpest spending cuts since World War II.

Although UBS reported profit gains, its shares fell 5.1 percent as analysts focused on weakness in its core investment banking operations.

Denmark's Vestas, the world's largest wind turbine maker, said its earnings fell and announced 3,000 layoffs to deal with a weaker European market. Its stock slumped 5.3 percent.

Finally, ArcelorMittal, the world's largest steelmaker saw its shares fall 3.7 percent after it said the outlook for the rest of the year is uncertain due to muted demand.

Asian markets mostly closed lower and Wall Street was expected to slide on the open -- Dow futures were down 0.2 percent at 11,096 while Standard & Poor's 500 futures were 0.1 percent lower at 1,182.20.

Australia's S&P/ASX 200 shed 0.5 percent amid news that lawmakers are threatening to scuttle a $8.3 billion deal for Singapore Exchange to buy ASX, the operator of the Australian stock market, saying it is against the country's interests. ASX shares tumbled 7 percent.

The two exchanges hope the deal will make them big enough to avoid being marginalized by cross-border trading platforms that are undermining the dominance of traditional stock markets.

Looking ahead, investors will keep an eye on more earnings reports out of the U.S. -- Bristol-Myers Squibb, Du Pont, Ford are due to report -- as well as a consumer confidence indicator and house price data. These will be key to gauging the health of the economy and the likelihood that the Federal Reserve will act to boost the money supply.

Expectations that it will provide more stimulus has weighed heavily on the dollar, which hit 15-year lows. It edged up Tuesday, to 81.01 yen from 80.83 yen in New York late Monday, but was not far from its post-World War II low of 79.75 set in 1995. The euro rose to $1.3953 from $1.3918.

The yen's rise has hurt major Japanese exporters, many of whom will report earnings later this week. They include Sony Corp. and Honda Motor Co.

The Nikkei 225 stock average closed down 23.78, or 0.3 percent, at 9,377.38 on Tuesday.

Hong Kong's Hang Seng index slipped 0.1 percent to 23,610.24 and the Shanghai Composite Index fell 0.3 percent at 3,041.54. South Korea's Kospi added 0.2 percent to 1,919.41.

Markets in India, Singapore, Indonesia and New Zealand fell while Taiwan and Malaysia gained.

Benchmark crude for December delivery was down 39 cents, or 0.5 percent, to $83.15 a barrel in electronic trading on the New York Mercantile Exchange.

[Associated Press; By CARLO PIOVANO]

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