* World stocks drop on global recovery concerns
* Sterling slips after Britain's GDP shrank unexpectedly
* Commodities fall on fears of economic tightening in Asia
(Update with U.S. markets' open, prices, comment, changes
byline, dateline from LONDON)
By Manuela Badawy
NEW YORK, Jan 25 (Reuters) - World stocks and the pound
slid on Tuesday after Britain's economy unexpectedly contracted
at the end of 2010 and fears of inflation in Asia undermined
confidence in the global recovery.
European shares fell after data showed a 0.5 percent
decline in UK gross domestic product in the fourth quarter as
Britain's government embarks on deep spending cuts.
For details, see []
Commodity prices plunged on worries of a slowdown from
Asia's biggest consumer countries. U.S. crude futures <CLc1>
fell 1.6 percent to $86.50 a barrel, copper hit one-month lows
and gold fell to its lowest in three months after India raised
interest rates, saying inflation may stay high for longer than
expected. []
U.S. Treasuries erased gains after a U.S. industry group
said its index of consumer attitudes jumped in January to the
highest since May 2010. []
"The UK news overnight was a reminder that it's really
growth that matters right now, and we saw stagnation in the UK
during the fourth quarter. That also puts a spotlight on
ongoing weakness in peripheral Europe and probably diminishes
ECB rate hike expectations," said Brian Dolan, chief currency
strategist at Forex.com in Bedminster, New Jersey.
"But in the U.S., we've got a strong consumer confidence
number, so the story comes back around to the U.S. economic
outlook, which looks stronger than Europe's or the UK's. That
should bode well for the dollar against sterling and the euro."
The euro came off a two-month high after an oversubscribed
euro zone rescue fund's first offer of debt. The euro <EUR=>
was down 0.07 percent at $1.3633. Against the Japanese yen, the
dollar <JPY=> was up 0.10 percent at 82.55.
The dollar <.DXY> was up 0.18 percent against a basket of
major currencies, while sterling <GBP=> was down 1.17 percent
at $1.5812 per pound.
U.S. stocks fell, weighed down by disappointing blue-chip
earnings.
The Dow Jones industrial average <> dropped 51.35
points, or 0.43 percent, to 11,929.17. The Standard & Poor's
500 Index <.SPX> fell 6.06 points, or 0.47 percent, to
1,284.78. The Nasdaq Composite Index <> lost 14.17 points,
or 0.52 percent, to 2,703.38.
Johnson & Johnson <JNJ.N>, 3M Co <MMM.N>, and American
Express Co <AXP.N> reported fourth-quarter results that failed
to impress investors.
World stocks as measured by MSCI <.MIWD00000PUS> fell 0.51
percent with the pan-European FTSEurofirst 300 index <>
of top shares dropping 0.63 percent. Tokyo's Nikkei average
<> rose 1.2 percent on hopes of upbeat company earnings.
The weak UK growth fanned concerns over the global economic
recovery, while scepticism over the cost of recapitalizing
Spanish banks weighed on euro zone peripheral government bonds
and Spain's stocks <>.
Spain's weak savings banks have seven months to boost
capital through private investors or the state will partially
take them over, Economy Minister Elena Salgado said on Monday,
adding that their total capital requirements should not exceed
20 billion euros. []
The European Financial Stability Facility, the 440 billion
euro fund being used to bail out Ireland, launched its debut
bond issue, with demand dwarfing the 5 billion euros on offer.
A source at the EFSF said it closed the order book with
demand at 43 billion euros, a sign of confidence in the
facility. []
With a two-day rate-setting meeting by the Federal Reserve
set to begin on Tuesday, U.S. Treasury prices erased some gains
after the consumer confidence data.
Stronger-than-expected economic news tends to hurt U.S.
Treasuries because it can deplete the risk-averse trade that
benefits safe-haven U.S. government debt.
The benchmark 10-year U.S. Treasury note <US10YT=RR> was up
1/32, with the yield at 3.3987 percent. The 2-year U.S.
Treasury note <US2YT=RR> was down 1/32, with the yield at
0.6291 percent. The 30-year U.S. Treasury bond <US30YT=RR> was
up 5/32, with the yield at 4.5501 percent.
The International Monetary Fund revised its world growth
forecast higher and said a package of U.S. tax cuts should give
a lift to the global economy. []
The Reuters/Jefferies CRB Index <.CRB>, a global benchmark
for commodities, was down 1.01 percent on worries of economic
tightening in Asia.
Spot gold prices <XAU=> fell $5.00, or 0.37 percent, to
$1,329.30 an ounce. Copper <CMCU3>, which is used in power and
construction, lost 2 percent at $9,341.25 a tonne.
(Reporting by Manuela Badawy; Additional reporting by Ryan
Vlastelica, Barani Krishan, Ellen Freilich and Dominic Lau,
Joanne Frearson in London; Editing by Kenneth Barry)
