(Updates with GE results, Wall Street outlook, comments)
By Jeremy Gaunt, European Investment Correspondent
LONDON, April 11 (Reuters) - Worse-than-expected results
from U.S. conglomerate General Electric <GE.N> turned a
tentative stock rally on its head on Friday and added further
pressures on the dollar.
The GE results underlined the extent of the slowdown in the
U.S. economy just ahead of a Group of Seven finance and central
bank meeting that hopes to draw a line under the credit crisis.
Wall Street looked set for a poor start after the report and
European shares sank deeply into negative territory after
earlier, relatively solid, gains.
The battered dollar extended losses against the euro and
yen, while demand for government bonds rose.
GE reported an unexpected 6 percent drop in profit and
lowered its earnings forecast for the year.
"These results confirm that the slowdown is widespread and
beginning to impact capex (capital expenditures) and
longer-cycle businesses," said Stephen Surpless, senior analyst
at Cantor Fitzgerald in London.
"While the credit crisis might be nearer to the end than the
beginning, according to some, the impact on the real economy is
taking place and is unlikely to abate in 2008," he added.
The FTSEurofirst 300 <> index of top European shares
was down more than 1 percent, reversing an attempt to break a
three-day losing streak.
Its earlier gains, along with those in Japan where the
Nikkei average <> rose 2.9 percent, were based on optimism
that the economic slowdown was not as bad as feared. Key
retailer reports in the U.S. and Japan were relatively buoyant.
G7 IN FOCUS
Investor focus was also on G7 finance ministers and central
bankers who were to meet in Washington later in the day with
calls from some, such as Bank of Japan Governor Masaaki
Shirakawa, for the rich nations group to show it was prepared to
ensure financial system stability.
They are expected to deploy an international team to keep
closer tabs on the world's big banks and demand better risk
management and information disclosure across financial markets.
Leading bank chiefs have been invited to the meeting to
discuss the global markets crisis, which could cost close to $1
trillion in losses and downgrades in the value of toxic assets
accrued over years of investor euphoria.
Currency traders, however, were sceptical that the G7 would
do anything to prop up the dollar.
"Not very many people expect the G7 to come out with a very
firm statement that could support the dollar, so we still have
quite a negative dollar environment, especially when ECB didn't
ease their concern about inflation," said Niels Christensen, FX
strategist at Nordea.
The ECB held rates at 4 percent as expected on Thursday.
WEAK DOLLAR
The dollar extended losses versus the yen and the euro after
the GE results
The dollar fell to 101.67 yen from around 101.95 before the
GE results <JPY=>. The euro extended gains to $1.5823, up half a
percent on the day <EUR=>.
"The GE results fed straight in to dollar/yen falling," said
a London-based trader.
Money moved into safe haven government bonds, depressing
yields.
The euro zone 10-year yield <EU10YT=RR> down to 3.956
percent, well off the session high of 4.011 percent.
The benchmark 10-year U.S. Treasury yield <US10YT=RR> fell 6
basis points to 3.4939 percent.
(Additional reporting by Blaise Robinson, editing by David
Christian-Edwards)
