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Downbeat US economic news weighs on world markets

Downbeat US economic news weighs on world markets

Another batch of downbeat U.S. economic news weighed on world markets Thursday and helped the euro break through $1.28 for the first time in over two months.
In Europe, the FTSE 100 index of leading British shares was down 4.91 points, or 0.1 percent, to 5,248.61, while Germany's DAX rose 4.18 points, or 0.1 percent, to 6,213.94. The CAC-40 in France was 2.8 points, or 0.1 percent, higher at 3,635.78.
On Wall Street, the Dow Jones industrial average was down 33.67 points, or 0.3 percent, at 10,330.05 soon after the open while the broader Standard & Poor's 500 index fell 3.08 points, or 0.3 percent, to 1,092.09.
There was more activity in the currency markets after the euro broke above $1.28 for the first time since May 11, when the EU announced its financial support package for the eurozone.
By mid-afternoon London time, the euro was up 1.1 percent on the day at $1.2876, just shy of its intraday high of $1.2879, its strongest level since May 10.
The primary reason behind the euro's latest advance and the subdued performance of stocks was further evidence that the U.S. economic recovery is slowing down.
Following a fairly downbeat assessment of the U.S. economy from rate-setters at the Federal Reserve, investors focused in on a raft of economic news, and all of it seemed to be confirming the Fed's outlook.
Industrial production figures from the Fed may have shown a twelfth consecutive increase but the rise was only 0.1 percent, while the Empire State survey of manufacturing conditions in and around New York showed activity slumping to a seven-month low in July and perilously close to recessionary conditions.
The minutes to the last meeting of June 22-23 _ published Wednesday _ showed that Fed officials thought the economic outlook had "softened" and that further steps to boost the U.S. economy may be necessary.
The Fed is now forecasting U.S. economic growth of 3.0-3.5 percent this year, against the 3.2-3.7 percent range predicted in April.
As a result of the minutes, investors think the Fed is in even less of a hurry to raise interest rates and that many of the extraordinary monetary measures introduced to cope with the financial crisis may be in place for much longer than previously anticipated.
Curiously, the run of soft U.S. economic data has not been echoed by recent earnings statements.
"Investors are now wondering about the sustainability of the recent rally and are hoping the recent strength in the U.S. corporate sector as characterized by the earnings releases from the likes of Intel and Alcoa will act as a counter to poorer macro environment," said Andrew Sykes, a trader at Spreadex.
The technology sector will be in focus later, with Advanced Micro Devices Inc. and Google Inc. due to report their latest quarterly figures.
"Forecasts for the latter have not been encouraging, with at least three analysts cutting estimates and Wall Street decidedly cautious about prospects for the internet giant, particularly in relation to its cost-per-click advertising business _ despite the company having beaten revenue expectations in five of the previous seven quarters," said Will Hedden, a sales trader at IG Index.
Earlier in Asia, the minutes from the Fed meeting had a bigger impact because stocks there had advanced strongly during the previous session.
Japan's Nikkei closed at 9,685.53, down 109.71 points, or 1.1 percent. Benchmarks across Asia _ including South Korea, Hong Kong, India and New Zealand _ also closed lower.
Figures from China, meanwhile, showed its rapid growth is slowing as the impact of its massive stimulus eases and Beijing clamps down on a credit boom. The world's third-largest economy grew by 10.3 percent in the second quarter over a year earlier, down from the first quarter's explosive 11.9 percent expansion.
Oil prices pushed back above $77 a barrel despite mixed signals about U.S. crude demand.
Benchmark crude for August delivery was up 48 cents to $77.52 a barrel in electronic trading on the New York Mercantile Exchange.
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Associated Press Writer Pamela Sampson in Bangkok contributed to this report.


Updated : 2021-07-31 07:39 GMT+08:00