European stocks down as Nikkei records 8th loss

[July 10, 2009]  LONDON (AP) -- European stock markets fell modestly Friday following lackluster performances on Wall Street and in Asia as investors remained on the sidelines. But second-quarter U.S. corporate earnings over the coming days and weeks have the potential to lift markets out of their current stupor.

The FTSE 100 index of leading British shares was down 11.45 points, or 0.3 percent, at 4,147.21 while Germany's DAX fell 3.23 points, or 0.1 percent, at 4,626.84. The CAC-40 in France was 8.25 points, or 0.3 percent, lower at 3,017.69.

Earlier in Asia, markets gyrated throughout the day before edging down. Japan's Nikkei index notched up its eighth straight loss, closing 3.78 points lower to 9,287.28.

"Volumes in equities have all but dried up which adds to investors reluctance to get back into the market at the present time," said Arifa Sheikh-Usmani, a trader at Spreadex.

Key over the coming days and even weeks could be the second-quarter earnings reporting season in the U.S. as it will provide clues about whether companies have already seen the worst of the recession or whether they are still struggling in the first synchronized global economic downturn since the Second World War.

So far, the earnings statements that have been released have been less than upbeat. While aluminum company Alcoa Inc. reported a smaller than anticipated second quarter loss as a result of cost-cutting measures, the U.S.'s second-biggest oil company warned that its refining margins were sharply down on the first quarter. And weak sales reports from U.S. retailers and more pain in the country's labor market did little to lift the mood.

Equities rose from the middle of March until the start of June on hopes that the U.S. economy in particular will recover from recession sooner than anticipated.

But disappointing economic news over the last few weeks, culminating in last week's worse than expected U.S. jobs report for June, has altered the mood prevailing among investors that a significant rebound in the U.S. was a possibility. Since peaking in early June, the Standard & Poor's 500 index and the Dow Jones industrial average have dropped around 7 percent.

U.S. stocks are expected to open lower later after muted gains Thursday.

"The Dow only just managed to scrape a positive finish and although the other major indices fared a little better, overall the final view was far from rosy," said Matt Buckland, a dealer at CMC Markets.

Dow futures were down 22 points, or 0.3 percent, at 8,112 while S&P futures fell 2.2 points, or 0.3 percent, to 876.70.

Elsewhere in Asia, Hong Kong's Hang Seng fell 82.17, or 0.5 percent, to 17,708.42. South Korea's Kospi fell 0.2 percent and Shanghai's index shed 0.3 percent. Meanwhile, Australia's index gained 0.8 percent and Singapore's market fell 0.2 percent.

Oil prices were down in Asia, with benchmark crude for August delivery falling 35 cents to $60.06 a barrel after earlier trading below $60. The contract rose 27 cents Thursday.

The dollar dropped 0.4 percent to 92.68 yen while the euro was 0.8 percent down at $1.3905.

The dollar was not affected by comments from a Chinese official Dai Bingguo that the world needs a "diversified and rational international reserve system."

Geoffrey Yu, an analyst at UBS, said the remarks were direct but also highlighted the fact that China is "treading cautiously" in its attempt to open a debate about the dollar's status as the world's reserve currency.

[Associated Press; By PAN PYLAS]

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

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