Shares fall amid earnings gloom

Oct 10 2012 07:48

A man checks the figures on an electronic stock board of a securities firm in Tokyo, Japan. (Koji Sasahara, AP) (Koji Sasahara)

Related Articles

Growth concerns hit shares, euro

Global growth worries hit shares, oil

Asian shares rise, growth worries weigh

US manufacturing data lifts shares

Euro, oil fall on Spain, growth worries

Asian markets down on Chinese data


Singapore - Asian shares fell on Wednesday, with Japan's stocks sliding more than 1.5% to a two-month low, and the safe-haven dollar firmed on concerns that the corporate results season will reveal weaker earnings in the face of flagging global economic growth.

Equity markets have been rallying since hitting their 2012 low in early June, with action from major central banks to support fragile economies giving a renewed lift last month, but caution has set in as the third quarter results season begins.

"History is not on the side of those who expect the market to continue to prosper once the earnings cycle has turned," said John Higgins, senior markets economist at Capital Economics, in a note.

The euro slipped, with a rise in Spanish bond yields as Madrid keeps markets guessing over whether it will request an international bailout and violent protests greeting German Chancellor Angela Merkel on a visit to Greece underlining how far the region's debt crisis is from resolution.

Growth-sensitive commodities such as oil and copper and currencies like the Australian dollar were under pressure, while the retreat from riskier assets boosted safe-haven government debt, with Japanese government bonds (JGB) following US Treasuries higher.

Japan's Nikkei share average fell 1.9%, while MSCI's broadest index of Asia Pacific shares outside Japan fell 0.5%.

US stocks fell around 1% on Tuesday, with shares of Intel, the world's largest semiconductor maker, losing 2.7% after downgrades from at least two brokerages. S&P 500 futures traded in Asia slipped 0.2%.

Asian technology stocks were hit by Intel's weakness, with the tech sub-index the biggest drag on the MSCI Asia ex-Japan with a 1% decline. South Korean heavyweight Samsung Electronics fell 2.0%.

Earnings warnings

Companies including FedEx, Caterpillar and Hewlett-Packard have warned about earnings, citing weak demand in Europe and China.

Thomson Reuters data shows analysts expect quarterly earnings for S&P 500 companies to decline about 2.3% from the year-ago period, the first fall in three years.

The International Monetary Fund said in its semi-annual check on the world's financial health on Wednesday that the euro area's debt crisis was the main threat and the risks to global financial stability had risen in the last six months, leaving confidence "very fragile".

The report adds to the gloomy backdrop ahead of the IMF's meeting to be held in Tokyo later this week. On Tuesday, the Fund said the global slowdown was worsening and cut its growth forecasts for the second time since April.

Mounting pessimism about the corporate and macroeconomic outlook drove investors towards government debt, with the 10-year JGB yield falling half a basis point to 0.765%, following a fall in benchmark Treasury yields on Tuesday.

The euro fell 0.2% to around $1.2850, while the dollar rose by a similar percentage against a basket of major currencies.

"Currencies will generally take their cue from stocks," said Junya Tanase, chief FX strategist at JPMorgan Chase. "Markets overnight turned against risk and whether that will be reversed will depend on how equities react to US third-quarter earnings results."

Oil fell, with Brent crude dropping nearly 60 cents to below $114 a barrel, as growth worries overcame the supply concerns driven by tensions in the Middle East that had been pushing crude higher in recent days.

"Oil has been falling as investors weigh supply risks against weaker demand," said Ben Le Brun, a market analyst at OptionsXpress in Sydney. "A lot of growth expectations are being revised down, especially in China."

Copper and gold prices were steady.

* Follow Fin24 on Twitter and Facebook.

dollar  |  global economy  |  markets



Read Fin24’s Comments Policy

24.com publishes all comments posted on articles provided that they adhere to our Comments Policy. Should you wish to report a comment for editorial review, please do so by clicking the 'Report Comment' button to the right of each comment.

Comment on this story
Comments have been closed for this article.

Company Snapshot

Money Clinic

Money Clinic
Do you have a question about your finances? We'll get an expert opinion.
Click here...

Voting Booth

The SARB’s Monetary Policy Committee will decide on the next move in interest rates tomorrow will they?

Previous results · Suggest a vote