World shares, oil retreat on global growth fears

Source : REUTERS
Last Updated: Wed, Oct 10, 2012 20:40 hrs
Traders work on the floor of the New York Stock Exchange

By Herbert Lash

NEW YORK (Reuters) - Global shares fell for a third day on Wednesday as corporate warnings of slower growth underscored concerns about a sluggish world economy, while oil prices slipped despite worries about the security of Middle East crude supplies.

Weak risk sentiment hurt equity markets after warnings from the International Monetary Fund, the World Bank and U.S. multinationals about the lackluster world economic outlook.

After the close of trading on Tuesday, Alcoa warned of dwindling aluminum consumption, while other large companies, including Dow component Chevron Corp , cautioned about slowing growth.

Alcoa shares slid 4.6 percent to $8.71, while Chevron fell 4.2 percent to $112.45 and was the biggest drag on the S&P 500. The company said third-quarter profits would be "substantially lower" than the previous quarter.

"I think the poor earnings for the third quarter are baked into the market. If that were the only issue I think there would be limited downside," said William Delwiche, investment strategist at Robert W. Baird & Co in Milwaukee.

"But what matters now is the outlook for the fourth quarter and 2013. So far it seems to be one of more caution, and if that trend continues that could be a headwind for stocks."

The Dow Jones industrial average <.DJI> closed down 128.56 points, or 0.95 percent, at 13,344.97. The Standard & Poor's 500 Index fell 8.92 points, or 0.62 percent, at 1,432.56. The Nasdaq Composite Index slid 13.24 points, or 0.43 percent, at 3,051.78.

Ebbing growth in China, the world's No. 2 economy, is expected to rein in corporate earnings in the third quarter and dent profit forecasts as the Asian nation feels the pinch of the debt crisis in the euro zone, a key trading partner.

The World Bank cut its growth forecast for East Asia this week on concern China's slowdown could last longer than expected.

On Tuesday, the International Monetary Fund said a deepening euro zone debt crisis threatened the global economy.

In Europe, the FTSEurofirst 300 index of top company shares fell 0.5 percent to close at 1,090.03, while MSCI's all-country world equity index slipped 0.6 percent.

The euro rebounded after falling to its lowest in more than a week against the dollar, pressured by uncertainty about whether Spain will apply for a bailout, widely considered the next step forward for Europe.

The euro was up 0.12 percent at $1.2899 after touching 1.2884. The U.S. dollar index was down 0.08 percent at 79.891.

European Union leaders are scheduled to meet at the end of next week. Euro zone finance ministers delivered a united defense of Spain at a meeting this week, saying the country did not need a bailout, at least for now.

"We are in a holding pattern," said John Doyle, currency strategist at Tempus Consulting in Washington. "What we're going to look for ... if there's any news coming out of Spain and possible decision on a full bailout or not."

Brent oil edged down in choppy trading, and U.S. crude turned lower after an early rally tested resistance at recent price peaks as concerns about the security of Middle East supplies amid escalating tensions over Syria partially offset fears that slowing world growth will curb demand.

Shelling along the Turkey-Syria border, hostility between Iran and the West and an impending Israeli election have reinforced fears of potential threats to Mideast oil supplies.

Turkey's military chief of staff said his troops would respond with greater force if bombardments from Syria kept hitting Turkish territory.

Brent crude fell 17 cents to settle at $114.33 a barrel. U.S. crude oil futures settled down $1.14 at $91.25 a barrel.

U.S. Treasuries prices rose, after a sale of 10-year notes, on underlying worries about the global economy and a squeeze on short positions.

While bonds sold off earlier as traders prepared for the $21 billion auction, part of this week's $66 billion in coupon-bearing offerings, Treasuries rebounded after the sale.

"There was some short covering, and that helped give the auction a pretty solid bid," said Kim Rupert, managing director of global fixed income analysis at Action Economics LLC in San Francisco.

The benchmark 10-year U.S. Treasury note was up 8/32 in price to yield 1.6854 percent.

(Additional reporting by Marc Jones in London; Editing by Bernadette Baum, Dan Grebler and James Dalgleish)

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