By Mike Dolan
LONDON, April 30 (Reuters) - Global stock markets slipped
for a second day on Wednesday as corporate earnings and economic
data disappointed investors and as traders bet a U.S. rate cut
they expect later in the day will be the last for at least some
months.
The dampener has come on the last two days of a month in
which MSCI's index of world stock markets <.MIWD00000PUS> surged
more than 5 percent.
But while investors have put aside some of their worst-case
scenarios for the 8-month-old credit crunch, caution about the
subsequent global economic slowdown and corporate profit outlook
persists as banks still struggle to repair shot balance sheets.
The MSCI world index was down 0.3 percent by 1130 GMT on
Wednesday.
Reuters surveys of 44 investment firms in the United States,
Europe and Japan -- released on Wednesday -- showed asset
managers raised exposure to equity during April but remained
below long-term averages of stock holdings. []
"Risky assets in financial markets recovered part of their
losses in recent weeks," said Marco Piersimoni, head of strategy
at Credit Agricole Asset Management.
"But it is too early to declare that normality is back. We
will carefully monitor companies' results and the U.S. job
market to gauge whether the worst is over or still to come."
The pan-European FTSEurofirst 300 index <> was down
0.4 percent by 1130 GMT at 1,323.37 points. A 0.8 percent fall
in the previous session broke a four-day winning streak.
Asia's bourses were also mixed to lower. Tokyo's Nikkei 225
<> shed 0.3 percent and Hong Kong's Hang Seng <> was
off 0.6 percent. China's main Shanghai index <> bucked the
trend and jumped 4.8 percent.
FED FOCUS
The U.S. Federal Reserve's latest interest rate decision is
due at 1815 GMT and interest rate futures markets show around a
75 percent probability that key rates will be cut by another
quarter percentage point to 2.0 percent. <FEDWATCH>
Fed lending rates have been lowered by three full percentage
points since September to ease the global credit crisis and
mounting banking stress.
But growing concern about commodity-fuelled inflation and a
steadying of world markets has prompted many investors to
speculate the Fed may at least pause its aggressive easing after
a cut on Wednesday.
"The Fed will probably ease its way into a position where it
can put policy on hold -- the markets have been expecting 25
basis points, and my guess is that they will concede that," said
Mike Lenhoff, chief strategist at Brewin Dolphin.
Close attention will be paid to the Fed's post-decision
comments, which are expected to indicate that it has reached the
end of its rate-cutting cycle.
Across Europe, Britain's FTSE 100 <> was down 0.7
percent, Germany's DAX <> down 0.3 percent and France's
CAC <> down 0.7 percent.
GLOOMY DATA
Critical before the Fed decision, however, will be the
release of U.S. gross domestic product data at 1230 GMT.
According to a Reuters poll, it is expected to show the U.S.
economy braked sharply to grow just 0.2 percent in the first
quarter, its slowest pace in five years, as consumers curbed
spending and jobs disappeared. []
Worrying for European and Asia markets on Wednesday were
signs the U.S. slowdown was starting to spread to Europe and
Japan and was also showing up in corporate earnings outlooks.
The European Commission said on Wednesday its economic
sentiment indicator for the euro zone fell to its lowest since
August 2005. [] The Bank of Japan earlier cut its
economic growth outlook for the year to next March by more than
half a percentage point. []
The euro <EUR=> fell to a four-week low of $1.5525 as the
weak euro zone data and slowing inflation signals raised
expectations the European Central Bank may ease up on its
hawkish rates stance.
European stocks were further weighed down by British gas
producer BG Group <BG.L>, which slid more than 5 percent after
unveiling a bid for an Australian rival.
French-American telecom equipment maker Alcatel-Lucent
<ALUA.PA> fell 7.8 percent after cutting its global telecom
equipment sector forecast.
SAP <SAPG.DE> fell 4.4 percent, dragging down the DJ Stoxx
European technology index <.SX8P>, after the business software
maker delayed a rollout of new software and reported
weaker-than-expected first-quarter sales and earnings.
Looking ahead, S&P 500 futures <SPM8> were a fraction lower
in London trading -- indicating a subdued start on Wall St.
U.S. banking giant Citigroup <C.N> said late on Tuesday it
would sell $3 billion of common stock to bolster its capital
levels, following in the footsteps of multi-billion pound rights
issues from HBOS <HBOS.L> and Royal Bank of Scotland <RBS.L>.
Citigroup's <C.N> stock fell in after-hours trade but its
credit premia also fell slightly on the news.
U.S. crude oil <CLc1> was down 28 cents at $115.35 a barrel
by 1100 GMT, extending its retreat from the record high of
$119.93 reached on Monday.
The retreat was helped by a Nigerian oil union agreeing to
return to work, raising hopes that production shut down in the
OPEC oil exporter will come back on line.
(Additional reporting by Jeremy Gaunt, Natsuko Waki,
Sitaraman Shankar in London and Tom Miles in Hong Kong; Editing
by Ruth Pitchford)
