European markets down, Asian markets up

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Published: July 28,2010

Tags: investing, investments, markets, stocks

LONDON — European stock markets traded in a narrow range today amid signs that the recent rally may be running out of steam due to worries about the U.S. economic recovery. Asian stocks closed sharply higher, however, on optimism over the region’s two leading economies, Japan and China.

In Europe, the FTSE 100 index of leading British shares was down 8.47 points, or 0.2 percent, at 5,357.10 20 while Germany’s DAX fell 19.44 points, or 0.3 percent, to 6,187.87. The CAC-40 in France was 8.68 points, or 0.2 percent, higher at 3,675.08.

Wall Street is poised for a subdued opening, following a late sell-off today — Dow futures were up 5 points at 10,499 while the broader Standard & Poor’s 500 futures rose less than a point to 1,111.50.

“The twitchier bears could easily look at that dip as an opportunity to make the most of the month’s steady rise and seize profits before any potential backsliding kicks in,” said David Jones, chief market strategist at IG Index.

Analysts said much of today’s trading momentum could hinge on U.S. durable goods data for June due later, as they could set the market mood ahead of Friday’s first estimate of second-quarter U.S. economic growth.

The consensus in the markets is that orders grew by 0.8 percent, but the series is notably volatile

“Reassurance on this front today would be helpful for U.S. growth prospects,” said Daragh Maher, an analyst at Credit Agricole.

The figures could also have an impact in the currency markets at a time when the euro is attempting to sustain a break above $1.30. By late morning London time, the euro was flat at $1.30.

The euro has been buoyed in recent days by a raft of stronger than anticipated European economic data, notably out of Germany, relief that last Friday’s bank stress tests did not highlight any systemic problems, and buoyant bank earnings from the likes of Deutsche Bank AG and UBS AG.

The main market focus is the extent to which the U.S. economic recovery is grinding to a halt. Though most U.S. companies have reported better than anticipated quarterly earnings, economic indicators have been far from reassuring.

Another release yesterday showed U.S. consumer confidence on the wane — that’s a concern because U.S. retail spending accounts for around 70 percent of the economy.

Most analysts also expect the U.S. Federal Reserve’s monthly economic assessment, known as the Beige Book, to echo the findings from the recent dataflow and that could push the euro back above $1.31.

“While today’s durable goods orders may provide some respite, the Beige Book will likely confirm the bleak outlook indicated by the regional Fed surveys and dollar weakness should continue,” said Ian Stannard, currency strategist at BNP Paribas.

“However gains beyond the $1.3130 level look unlikely at this stage — a strong euro will do nothing to ease the process of readjustment within the eurozone,” he added.

Earlier, Japan led the advance in Asia, with the Nikkei 225 stock average closing 2.7 percent higher at 9,753.27 after laser printer and digital camera marker Canon reported a surge in quarterly earnings. Investors were also relieved that the yen’s recent export-sapping appreciation against the dollar was reversing somewhat — by late morning London time, the dollar was 0.1 percent higher at 87.94 yen.

China’s main Shanghai index rose strongly after China’s central bank said it believes the mainland’s economy is unlikely to suffer a “double dip” and the International Monetary Fund said growth would likely be robust. The index closed up 2.3 percent at 2,633.66, its highest finish since May 14.

Hong Kong’s Hang Seng gained 0.6 percent to 21,091.18 and South Korea’s Kospi advanced 0.3 percent to 1,773.47. Australia’s benchmark added 0.7 percent to 4,529.90. Markets in Singapore, Taiwan, Indonesia and New Zealand also rose.

Oil prices hovered above $77 a barrel after a report showed U.S. oil supplies unexpectedly rose last week, suggesting demand remains subdued. Benchmark crude for September delivery was up 8 cents at $77.58 a barrel in electronic trading on the New York Mercantile Exchange.

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