World markets down after weak US earnings

[May 04, 2011]  BANGKOK (AP) -- A batch of weaker-than-expected earnings that interrupted a two-week rally on Wall Street also sent stocks lower in Europe and Asia on Wednesday.

Oil prices fell to near $110 a barrel as a report showed U.S. crude supplies rose more than expected last week, suggesting growth in demand could be waning. In currencies, the dollar fell against the euro but was higher against the yen.

Sentiment for riskier assets was muted as investors fretted about potential terrorist attacks following the killing of Osama bin Laden at the hands of U.S. commandoes over the weekend.

"The market welcomes the good news, but it worries about whether this news will lead to higher short term uncertainties on the concern of revenge activities," Bank of America Merrill Lynch said in a report.

In early European trade, Britain's FTSE 100 lost 0.8 percent to 6,036.04. Germany's DAX was 0.2 percent lower to 7,486.79 and France's CAC-40 was off 0.2 percent at 4,089.03. Wall Street was headed for a tentative day of trading, with Dow Jones industrial futures nearly unchanged at 12,754 and S&P 500 futures mostly flat at 1,351.70.

Enthusiasm for stocks was also dampened by a report Tuesday by the People's Bank of China that reflected continuing concerns over inflation. Such concerns could spur the central bank to place additional curbs on lending, which would reduce the amount of money available for investment in the hopes of stabilizing prices.

Hong Kong's Hang Seng index dropped 1.4 percent to 23,315.24. Shares of Hong Kong-listed Zijin Mining Group, China's biggest gold miner, tumbled 2.7 percent after a court in southeastern China ordered the company to pay a $4.6 million fine for toxic mine spills at the Zijinshan Gold and Copper Mine nearly a year ago.

Blue chip property shares also fell over possible new restrictions aimed at cooling housing prices. China Resources Land Ltd. dropped 2.7 percent and China Overseas Land & Investment was down 2.6 percent.

Mainland Chinese shares saw their biggest loss in over two months on concerns over further monetary tightening measures. The Shanghai Composite Index fell 2.3 percent to 2,866.02, while the Shenzhen Composite Index lost 2.2 percent to 1,187.28. Shares in oil, coal and real estate industries weakened.

"In the short term, the market could rally after this biggest loss in almost three months, if there is no interest rate hike soon," said Peng Yunliang, an analyst based in Shanghai.

Expectations that persistent high inflation may prompt new moves to tighten credit are adding to fears that China's demand for key commodities could soften in coming months.

PetroChina, the country's biggest oil and gas company, lost 2.2 percent while China Petroleum & Chemical Corp., Asia's biggest refiner, slipped 2.4 percent as crude oil prices hovered near $111 a barrel.

South Korea's Kospi was 0.9 percent lower to 2,180.64. Indexes in Singapore and Malaysia also posted losses. Benchmarks in Taiwan and New Zealand finished up. Markets in Japan were closed for a holiday.

Australia's S&P/ASX 200 lost 0.9 percent to 4,740.10. Westpac Banking Corp., one of Australia's largest lenders, said Wednesday that its first-half profit rose 38 percent, in line with expectations, as bad debt charges fell.

Westpac shares slid 2.5 percent as the bank noted that consumer sentiment was expected to remain cautious. National Australia Bank Ltd. lost 2.4 percent, ANZ Banking Group Ltd. was down 1.5 percent and Commonwealth Bank of Australia slid 1.3 percent.

On Wall Street on Tuesday, the earnings rally that had lifted the stock market over the past two weeks paused after a batch of results that fell below analyst expectations.

Pfizer, the world's largest drug maker, posted lower-than-expected quarterly results. Clorox, Molson Coors Brewing Co., and Beazer Homes also declined after announcing weaker earnings.

The Dow Jones industrial average gained less than a point to close at 12,807.51. The S&P 500 index fell 4.60 points to 1,356.62. The Nasdaq composite fell 22.46 points to 2,841.62.

Benchmark crude for June delivery was down 35 cents at $110.70 a barrel in electronic trading on the New York Mercantile Exchange. The contract fell $2.47 to settle at $111.05 on Tuesday.

In currencies, the euro strengthened to $1.4863 from $1.4821 late Tuesday in New York. The dollar was slightly higher to 80.98 yen from 80.91 yen.

The dollar has fallen over the past few weeks as investors expected the Federal Reserve would keep interest rates low while central banks overseas are raising interest rates. Higher rates tend to make currencies more attractive to investors seeking higher yields.

[Associated Press; By PAMELA SAMPSON]

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