Stocks fall as European markets open
WSJ: LONDON—European stocks came off lows Friday, having slumped across the board to levels not seen since mid-2008, though Wall Street looked poised for another down day as concerns regarding the prospects for global growth continued to dent sentiment ahead of key U.S. nonfarm payrolls data.
Despite a sea of red at the start of Friday's session, bank stocks managed to come off their initial lows and peripheral markets in the euro zone recovered. Italian and Spanish bonds reversed their earlier losses as speculation grew that the European Central Bank was intervening in the market.
The Stoxx Europe 600 index was down 1.5% at 239.46 recently, off the earlier low of 235.12. London's FTSE 100 was down 2.2% at 5273.89, falling further than its European counterparts.
Disappointing earnings from Royal Bank of Scotland didn't help the blue-chip London index. RBS was down 5.6% in London following the release of its first-half results. The bank said it swung to a net loss of £1.43 billion, compared with a net profit of £9 million in the first half of 2010. The bank also said it took a £733 million impairment on its Greek government bonds.
Elsewhere, Frankfurt's DAX declined 2.2% to 6271.82 and Paris's CAC-40 was 0.6% lower at 3301.80.
Meanwhile, doubts remained about the health of the U.S. economy, amid rising speculation about a third round of quantitative easing, following a raft of less-than-inspiring data releases that have shifted the focus firmly to Friday's nonfarm payrolls.
"We have payrolls today to calm the market's nerves or send us further into panic mode," said Deutsche Bank. "In reality, the markets are not just reacting to the disappointing policy response from the European Central Bank but also to growing indications that the two-year weak cyclical recovery is running out of gas."
The markets are expecting July's headline payrolls to gain 85,000 after a dismal 18,000 gain in June. The Dow Jones Industrial Average front-month futures contract recently was down 0.5% at 11311.0 and S&P 500 was down 0.3% at 1194.60.
Earlier in Europe, figures showed Italy's GDP accelerated in the second quarter, expanding by 0.3% quarter-to-quarter.
"Italy remains at risk of a moderate pace of growth for the whole year as headwinds to activity have recently intensified. However, today's GDP data are not too bad," said Annalisa Piazza, economist at Newedge.
Italy's FTSE MIB was up 0.8% and Spain's IBEX 35 was up 1.5%. Meanwhile, the Stoxx Europe 600 banks index was flat at 154.17, having slumped earlier.
However, economic data out of Germany were less satisfying. German industrial production dropped 1.1% month-to-month in June.
Carsten Brzeski, economist at ING Bank, said a high level of business confidence and incoming new orders should ensure moderate growth development over the summer months but the German economy no longer looks immune to the euro-zone debt crisis.
"The latest stage of the sovereign debt crisis and panic on financial markets are a worrisome reminder...that these two worlds are getting alarmingly close. Strong German growth shouldn't be taken for granted."
In the foreign exchanges, the euro managed to steady following earlier losses. The single currency traded recently at $1.4171, from $1.4093 late Thursday in New York while the dollar was at ¥78.43 from ¥78.87.
Among commodities, spot gold was at $1,667.40 a troy ounce, up $17.40 from New York, while September Nymex crude-oil futures were down 75 cents at $85.88 a barrel. In the bond markets, the September bund futures contract was up 0.35 at 132.44.