(Updates with Wall Street outlook, LIBOR)
By Natsuko Waki
LONDON, April 24 (Reuters) - European stocks and the euro
fell while safe-haven government bonds gained on Thursday as
surveys showing deterioration in German corporate morale and the
UK manufacturing sector raised concerns about Europe's economy.
The Ifo Institute's German business climate index fell to
102.4 in April, its lowest since January 2006, from 104.8 a
month ago, against a forecast for a drop to 104.3. Current
conditions and expectations indexes also fell.
A separate survey showed British manufacturing orders
unexpectedly fell in April, weakening at their sharpest rate in
18 months.
The surveys came as bleak first-quarter results from Credit
Suisse <CSGN.VX> overwhelmed positive reports from some European
firms, fuelling fears that financial sector weakness due to the
global credit crisis would spill over into the real economy.
"The market is beginning to question whether the euro zone
is isolated from the U.S. slowdown or whether we're finally
beginning to see a catch-up in the euro zone, softening in line
with the United States, and that clearly is euro negative," said
Adam Cole, global head of currency strategy at RBC.
The FTSEurofirst 300 index <> was down 1 percent,
dragged lower by banks <.SX7P> which fell more than 1 percent as
a sector. MSCI's main world equity index <.MIWD00000PUS> was
down 0.6 percent, off Monday's three-month high.
Better-than-expected earnings results from Swiss engineer
ABB <ABBN.VX> and German chemicals and drugmaker Bayer <BAYG.DE>
contrasted with the unveiling of 5.3 billion Swiss francs ($5.26
billion) of credit-related writedowns and an above-forecast Q1
loss at Credit Suisse.
This followed Wednesday's worse-than-expected loss from
Ambac Financial Group <ABK.N>, a U.S. bond insurer that
struggled to raise capital earlier this year.
U.S. stock futures were down 0.6 percent <SPc1>, indicating
a weaker open on Wall Street where key results from firms
including Microsoft <MSFT.O>, Dow Chemical <DOW.N> and Ford
Motor <F.N> are due later.
The interbank cost of borrowing three-month euro funds rose
to a four-month peak of 4.83375 percent <LIBOR>, reflecting
persistent stress in the money market.
The cost of borrowing sterling funds eased, but strains in
funding since the outbreak of the credit crisis last August have
darkened the UK housing market, with housebuilder shares falling
broadly in London trading.
A barrage of gloomy earnings forecasts in Japan pushed Tokyo
stocks lower <>, with spiralling costs of raw materials as
a result of surging commodity prices weighing on corporate
profitability.
The euro fell 0.8 percent to hit a one-week low of $1.5720
<EUR=>, having set a record high above $1.60 this week. The June
Bund future <FGBLM8> rose 50 ticks.
FALLING CONFIDENCE
The decline in German corporate sentiment followed similar
drops in business confidence in France, Belgium and the
Netherlands.
"The message coming from the release of the business
confidence indicators is unanimous across the main euro area
countries: at the start of the second quarter, the outlook for
the manufacturing sector has deteriorated substantially," Lehman
Brothers said in a note to clients.
"In addition to the continued deterioration of the
international environment, surging oil prices, the strong euro
and slowing world demand probably explain these developments."
Emerging sovereign spreads <11EMJ> and emerging stocks
<.MSCIEF> were steady on the day.
U.S. light crude <CLc1> eased 0.7 percent to $117.23 a
barrel after hitting record highs of $119.90 earlier in the
week. Gold <XAU=> ticked lower to $900.80 an ounce.
(Editing by Ruth Pitchford)
