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US manufacturing fears weigh on world markets

US manufacturing fears weigh on world markets

Disappointing U.S. manufacturing surveys hit world markets Thursday but helped the euro break through $1.29 for the first time in over two months as fears about the U.S. economy took the spotlight away from worries about Europe's government debt crisis.
In Europe, the FTSE 100 index of leading British shares closed down 42.23 points, or 0.8 percent, at 5,211.29, while Germany's DAX fell 60.40 points, or 1 percent, to 6,149.36. The CAC-40 in France ended 51.16 points, or 1.4 percent, lower at 3,581.82.
On Wall Street, the Dow Jones industrial average was down 87.56 points, or 0.8 percent, at 10,279.16 around midday New York time while the broader Standard & Poor's 500 index fell 9.75 points, or 0.9 percent, to 1,085.42.
There was more activity in the currency markets after the euro broke above $1.29 for the first time since May 11, when the EU announced its financial support package for the eurozone. By late-afternoon London time, the euro was up 1.3 percent on the day at $1.2909, just shy of its intraday high of $1.2917, 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. That more than offset any optimism generated by the news that U.S. bank JPMorgan Chase & Co. delivered better than anticipated quarterly earnings of $1.09 a share in the April-June quarter.
"Not even better-than-expected profits from JP Morgan managed to lift sentiment today, as investors went back to focussing on the bigger economic picture," said David Jones, chief market strategist at IG Index.
Particularly worrying were a pair of surveys showing that the industrial recovery in the U.S. is rapidly losing momentum.
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, while a similar survey from the Philadephia Fed was even worse, with its main index of activity falling to an 11-month low.
"Together, these surveys add to the evidence that the previously strong recovery in the factory sector has stalled," said Paul Ashworth, senior U.S. economist at Capital Economics.
"The declines in the shipments indices in both surveys suggest that a double-dip in manufacturing is now possible," Ashworth added.
The surveys come in the wake of Wednesday's publication of the minutes to the last Fed rate-setting meeting of June 22-23, which 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. The technology sector will be in focus later, with Advanced Micro Devices Inc. and Google Inc. due to report their latest quarterly figures.
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 slid below $76 a barrel as investors fretted about the outlook for U.S. crude demand.
Benchmark crude for August delivery was down $1.15 to $75.89 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 : 2021-04-12 10:25 GMT+08:00