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European Stocks To Start Modestly Lower
European stocks are expected to open modestly lower Thursday, after poor U.S. retail sales data and a cut by the Federal Reserve in its economic growth forecasts outweigh a strong earnings report from the technology company Intel.
The minutes of the June meeting of the Federal Open Market Committee revealed modest downgrades in the Fed's GDP growth forecasts for 2010 and 2011, and a more sizeable increase in the unemployment rate forecast.
As a result, James Hughes, market analyst at CMC Markets, expects London's FTSE 100 index to start 10 points lower, or down 0.2%, at 5244, Frankfurt's DAC down 13 points, or 0.2%, at 6197, and Paris's CAC-40 down 16 points, or 0.4%, at 3617.
The Fed predicted that GDP would expand by 3.0% to 3.5% this year rather than the 3.2% to 3.7% rate previously projected, while Wednesday's soft U.S. retail sales report further underscored concerns about the U.S. economic recovery.
Julia Coronado, economist at BNP Paribas, said the members stated they would have to consider whether further policy stimulus might become more appropriate if the outlook were to worsen significantly. "The discussion of further stimulus is a significant departure from the prior meetings this year when the focus has been on policies to unwind stimulus... Therefore, we would expect [Federal Reserve] Chairman Bernanke to be more firm in his concern about the outlook at next week's monetary policy report to Congress," she said.
Hughes agreed, saying the FOMC minutes will yet again lead to questions about the strength of the U.S. economic recovery.
On Wall Street Wednesday, the strong earnings report from Intel boosted U.S. blue-chip stocks, helping the Dow Jones Industrial Average to eke out a gain.
But the Dow's gain was slim and the broader Standard & Poor's 500 index snapped a six-day streak as optimism over the pace of corporate earnings gave way to concern about the chilly economic forecast from the Fed.
The Dow climbed 0.04% to 10,366.72, led by its technology components after chip-maker Intel posted the strongest quarterly results in its 42-year history. The technology-heavy Nasdaq Composite gained 0.4% to 2249.84, marking its seventh straight session in the black. But the S&P 500 slipped 0.02% to 1095.17, narrowly missing its chance to set the measure's longest winning streak since October 2006.
Later, Asian shares recouped some of their earlier losses Thursday after Chinese growth and inflation data. China's GDP rose 10.3% in the second quarter from a year earlier, compared with the first quarter's 11.9% growth rate, the National Bureau of Statistics said. The extent of the slowdown slightly exceeded market expectations, which had centered on a 10.5% increase in second-quarter GDP. Inflation data for June also came in significantly lower than expected, which will likely mean less urgency to raise interest rates or take other monetary-policy tightening measures in the near future.
Japan's Nikkei Stock Average fell 1.1% while Australia's S&P/ASX 200 lost 0.5% and South Korea's Kospi Composite fell 0.3%. Hong Kong's Hang Seng Index declined 1.0% and the Shanghai Composite index was down 0.2% after recovering from an earlier loss of 0.6%.
In the European foreign exchanges, the euro eased gently in early trade after notching up modest gains on Wednesday following confirmation by the Fed that the pace of the U.S. economic recovery is slowing.
At 0635 GMT, the single currency was trading at $1.2725, down from $1.2744 late Wednesday in New York, and the dollar was trading at Y88.14, down from Y88.41.
Spot gold was at $1210.20 per troy ounce, up $1.65 from New York's close Wednesday. August Nymex crude oil futures were down 45 cents at $76.59 per barrel. September bund futures opened higher, up 0.25 at 128.97.
With no important economic data from the U.K. or the euro zone Thursday, attention is likely to focus on a Spanish bond auction. In the U.S., the producer price index, initial jobless claims and the Empire State manufacturing index are due at 1230 GMT. Industrial production is at 1315 GMT and the Philadelphia Fed index at 1400 GMT.
The minutes of the June meeting of the Federal Open Market Committee revealed modest downgrades in the Fed's GDP growth forecasts for 2010 and 2011, and a more sizeable increase in the unemployment rate forecast.
As a result, James Hughes, market analyst at CMC Markets, expects London's FTSE 100 index to start 10 points lower, or down 0.2%, at 5244, Frankfurt's DAC down 13 points, or 0.2%, at 6197, and Paris's CAC-40 down 16 points, or 0.4%, at 3617.
The Fed predicted that GDP would expand by 3.0% to 3.5% this year rather than the 3.2% to 3.7% rate previously projected, while Wednesday's soft U.S. retail sales report further underscored concerns about the U.S. economic recovery.
Julia Coronado, economist at BNP Paribas, said the members stated they would have to consider whether further policy stimulus might become more appropriate if the outlook were to worsen significantly. "The discussion of further stimulus is a significant departure from the prior meetings this year when the focus has been on policies to unwind stimulus... Therefore, we would expect [Federal Reserve] Chairman Bernanke to be more firm in his concern about the outlook at next week's monetary policy report to Congress," she said.
Hughes agreed, saying the FOMC minutes will yet again lead to questions about the strength of the U.S. economic recovery.
On Wall Street Wednesday, the strong earnings report from Intel boosted U.S. blue-chip stocks, helping the Dow Jones Industrial Average to eke out a gain.
But the Dow's gain was slim and the broader Standard & Poor's 500 index snapped a six-day streak as optimism over the pace of corporate earnings gave way to concern about the chilly economic forecast from the Fed.
The Dow climbed 0.04% to 10,366.72, led by its technology components after chip-maker Intel posted the strongest quarterly results in its 42-year history. The technology-heavy Nasdaq Composite gained 0.4% to 2249.84, marking its seventh straight session in the black. But the S&P 500 slipped 0.02% to 1095.17, narrowly missing its chance to set the measure's longest winning streak since October 2006.
Later, Asian shares recouped some of their earlier losses Thursday after Chinese growth and inflation data. China's GDP rose 10.3% in the second quarter from a year earlier, compared with the first quarter's 11.9% growth rate, the National Bureau of Statistics said. The extent of the slowdown slightly exceeded market expectations, which had centered on a 10.5% increase in second-quarter GDP. Inflation data for June also came in significantly lower than expected, which will likely mean less urgency to raise interest rates or take other monetary-policy tightening measures in the near future.
Japan's Nikkei Stock Average fell 1.1% while Australia's S&P/ASX 200 lost 0.5% and South Korea's Kospi Composite fell 0.3%. Hong Kong's Hang Seng Index declined 1.0% and the Shanghai Composite index was down 0.2% after recovering from an earlier loss of 0.6%.
In the European foreign exchanges, the euro eased gently in early trade after notching up modest gains on Wednesday following confirmation by the Fed that the pace of the U.S. economic recovery is slowing.
At 0635 GMT, the single currency was trading at $1.2725, down from $1.2744 late Wednesday in New York, and the dollar was trading at Y88.14, down from Y88.41.
Spot gold was at $1210.20 per troy ounce, up $1.65 from New York's close Wednesday. August Nymex crude oil futures were down 45 cents at $76.59 per barrel. September bund futures opened higher, up 0.25 at 128.97.
With no important economic data from the U.K. or the euro zone Thursday, attention is likely to focus on a Spanish bond auction. In the U.S., the producer price index, initial jobless claims and the Empire State manufacturing index are due at 1230 GMT. Industrial production is at 1315 GMT and the Philadelphia Fed index at 1400 GMT.
-By Andrea Tryphonides, Dow Jones Newswires; +44-20-7842-9281; andrea.tryphonides@dowjones.com
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