Wednesday July 8, 11:41 AM
Global equities slip on poor economic outlook
LONDON (AFP) - World stock markets weakened Wednesday as investors fretted over the poor global economic outlook ahead of a key G8 summit and results from US aluminium giant Alcoa (NYSE: AA - news) .
The heads of the world's industrialised powers gathered for their annual summit in Italy with talks to review efforts to shore up the foundations of the battered global economy.
"Markets continue to focus on the G8 summit even though it is unlikely to bring any far-reaching decisions," said Commerzbank (Xetra: 803200 - news) analyst Ulrich Leuchtmann.
"The subjects due for discussion -- situation of the global economy, global issues, international subjects, development policies, sources of future growth and impacts of the crisis on Africa -- provide plenty of opportunity for the participating leaders of government to issue market-moving statements."
In Asia on Wednesday, Tokyo shares plunged 2.35 percent and Hong Kong lost 0.79 percent, after New York's Dow Jones Industrial Average had shed 1.94 percent overnight, as worries deepened about the outlook.
Investors dumped shares as optimism that the worst of the recession is over faded and markets braced for a raft of upcoming corporate results.
Government data showing that Japanese machinery orders fell to a record low in May further soured the mood in Tokyo.
In Europe on Wednesday, London's FTSE 100 index was down 0.04 percent, Frankfurt's DAX 30 (Xetra: news) dipped 0.07 percent and the Paris CAC 40 fell 0.50 percent in late morning trade.
"Equity markets across Europe traded marginally lower for the third morning in a row after a disappointing evening on Wall Street," said analyst Nick Serff at spread-betting firm City Index.
Sliding stock markets meanwhile encouraged many investors to plough cash into the safe-haven US dollar and the bond market, he added.
"Stocks have continued to fall with investors now favouring safer places to put their cash. Bond and dollar plays remain in focus following talk that a second US stimulus package could be needed," Serff noted.
Wall Street stocks sank Tuesday as sentiment was rocked by comments from a US administration adviser suggesting a new government stimulus may be required to jolt the economy from recession.
Laura Tyson, an economic adviser to President Barack Obama, said at a Singapore conference that the United States might need a second stimulus package focusing on infrastructure projects.
"The markets... have been spooked (by) talk of a second government stimulus plan," said CurrenciesDirect analyst Phil McHugh in London.
"This has heightened fears that the economy is not yet on the path to recovery and that corporate earnings due this week will be weaker than expected."
He added: "More stimulus basically equals uncertainty and a lack of confidence from the government that enough has not been done already -- this naturally transpires to a lack of investor confidence."
The energy sector was meanwhile under pressure on Wednesday due to tumbling oil prices.
Crude oil slumped under 62 dollars per barrel to hit the lowest levels since May, as the gloomy outlook weighed on sentiment ahead of the weekly US energy (USEG - news) report.
Later Wednesday across the Atlantic, investors will digest crucial earnings news from Alcoa.
"Investors will be watching closely as the Q2 earnings season gets underway with Alcoa kicking us off tonight," Serff added.
"With markets around the globe now resting on key support levels we could get a rally attempt as companies start to report. If earnings disappoint and economic data does not improve, the markets could move sharply lower; opening up levels not seen since March."
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