Friday, April 8, 2011

GLOBAL MARKETS-Stocks slip after new Japan earthquake

NEW YORK: Stocks on major world markets slipped after a second earthquake rocked Japan on Thursday, April 7 while the euro retreated against the U.S. dollar after the European Central Bank raised interest rates but signaled it was not necessarily the start of a round of hikes.

U.S. and European stocks ended lower after an earthquake measuring 7.4 shook northeast and eastern Japan. A tsunami warning was issued for the northeastern coast but later lifted. For details, see [ID:nL3E7F72Y2]

However, Wall Street stocks ended off their lows for the day as better-than-expected sales reported by major retailers and good weekly jobs data boosted optimism for a sustained economic recovery.

European stocks ended down 0.2 percent and the S&P 500 finished down 0.15 percent. U.S.-dollar denominated Nikkei futures were down 1.6 percent. Japan is the world's third-largest economy and investors feared the new quake could harm the global recovery with some manufacturers' supplies from Japan already interrupted.

"It got people thinking that maybe this is not finished yet, and this is of a bigger scale than what we had expected," said Jack DeGan, chief investment officer at Harbor Advisory Corp in Portsmouth, New Hampshire.

European shares had earlier gained after Portugal's request for European aid fostered hopes the region's debt crisis may be closer to an end. The pan-European European FTSEurofirst 300 stock index <.FTEU3> was down 0.2 percent. Portugal's stock market bucked the trend, with the PSI 20 <.PSI20> index up 1.2 percent.

The Dow Jones industrial average <.DJI> slipped 17.26 points, or 0.14 percent, to 12,409.49. The Standard & Poor's 500 Index <.SPX> lost 2.03 points, or 0.15 percent, to 1,333.51. The Nasdaq Composite Index <.IXIC> eased 3.68 points, or 0.13 percent, to 2,796.14.

World stocks as measured by MSCI <.MIWD00000PUS> were off 0.3 percent.


The ECB raised its benchmark interest rate by a quarter percentage point to 1.25 percent to counter rising inflation. But ECB President Jean-Claude Trichet said it was not necessarily the start of a series of rate hikes, disappointing some who had expected a more hawkish tone. [ID:nLDE7351QH]

The euro was last down 0.3 percent at $1.4292, off a more than 14-month high of $1.4350 touched on Wednesday.

Spot gold hit a new record at $1,464.80 an ounce following Trichet's comments before easing back to trade slightly higher.

"His tone is decidedly neutral right now. He's keeping things very close to his vest," said Boris Schlossberg, director of research at GFT in New York, referring to Trichet's comments. "The euro trade has been so focused on interest rate differentials, so some of the fast money might come out of the trade."

It was the first rate increase since 2008 and followed a day after Portugal's caretaker government requested European Union aid at the urging of leading bankers. They wanted a bailout to help the economy and safeguard its banking system.

Portugal said it will make the formal request for aid later on Thursday. The rescue package could reach 85 billion euros ($122 billion).

Spain vowed it would not follow Portugal in seeking a bailout. A successful Spanish bond auction suggested markets do not fear contagion at the moment.

Investors got more signs of a firming labor market as new U.S. claims for unemployment benefits fell slightly more than expected last week. Other data showed March was not as bad as expected for many U.S. retailers even in the face of higher gasoline prices and retail stocks rose.

Among commodities, spot gold was up 0.1 percent in late trade after hitting a new peak. Chicago corn futures reached a fresh all-time high at $7.73-1/4 before ending lower ahead of the USDA's April supply/demand report early on Friday.

Oil prices ended at 2-1/2-year highs as supply worries due geopolitical turmoil overshadowed demand concerns. U.S. May crude futures closed up $1.47 at $110.30 a barrel, the best since Sept. 22, 2008. - Reuters

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