New York: Benchmark US shares closed at seven week lows on Thursday, marring an otherwise positive day in global equity markets as sentiment turned negative in thin seasonal trade ahead of a key speech by Federal Reserve chairman Ben Bernanke.
While the US stock market fell, pulling the Dow Jones Industrial average below the psychologically significant 10,000 mark, it was just the opposite in Europe and Japan where prices rebounded.
In Europe, strong earnings helped boost shares from five week closing lows and in Japan, buyers stepped in after four-days of losses to pull the Nikkei up from a 16-month trough.
The euro advanced against the greenback and yen, which helped bolster crude oil prices more than 1% but did not give spot gold a lift.
Data showing new weekly US jobless benefit claims fell more than expected last week were still too high to signal a shift in the weak labor market that is constraining economic growth.
“The best the bull can say is that the recovery is evening itself out now, it’s not accelerating any more,” said Linda Duessel, market strategist at Federated Investors in Pittsburgh.
“We think it’s a soft patch and not a double dip, but the market is pricing more and more for a double dip, so you’re vulnerable to the upside,” she said.
Bernanke speaks on Friday at an annual Fed meeting in Jackson Hole, Wyoming. While he is likely to signal his views about prospects for the US economy he may not offer clues on whether the Fed will try to shore up growth with another round of cash injections.
“Labour market weakness remains the primary concern in the economy,” said Dana Saporta, economist at Credit Suisse. “That’s something that Bernanke has to address at his Jackson Hole speech tomorrow.”
At the close of trade, the Dow Jones industrial average fell 74.25 points, or 0.74%, to 9,985.81, its lowest point since early July. The Standard & Poor’s 500 Index lost 8.11 points, or 0.77%, to 1,047.22. The Nasdaq Composite Index dropped 22.85 points, or 1.07%, at 2,118.69.
PC maker Dell said data-storage company 3PAR has accepted its $1.6 billion takeover bid. Shares of Dell and 3PAR closed lower.
Toyota also fell after the company announced it would recall more than 1 million Corolla and Corolla Matrix vehicles as a result of engine problems.
Elsewhere, strong corporate earnings aided Europe’s markets. The FTSEurofirst 300 index of top European shares closed 0.9% higher at 1,020.27 points.
French bank Credit Agricole rose 2.7% on an 89% rise in second-quarter net profit, miner Kazakhmys gained 5.2% after its underlying first-half earnings per share jumped 130% and French hotel group Accor rose 3.9% on doubling of core profit.
MSCI’s main gauge of global equities was up 0.33% after hitting its lowest level since July 7 on Wednesday. The Thomson Reuters global stock index was 0.13% higher.
“Companies have been reporting reasonable results,” said David Buik, partner at BGC Partners. “But whether a rally can be sustained is to be seen. There is nothing to say the bad news is all over.”
With only a few companies left to report for the second quarter, Thomson Reuters Proprietary Research shows U.S. S&P 500 had average earnings growth of 38.4% in the recent reporting season.
Markets have been balancing good corporate profit results with signs that growth in the US economy is slowing.
In currencies, safe-havens such as the yen and the Swiss franc extended their rallies ahead of Bernanke’s speech.
Any statement from Bernanke on continuing or increasing economic stimulus measures could dent the dollar given that European authorities are perceived as more given to austerity than the US.
“A second round of quantitative easing will likely put sharp downward pressure on the dollar, to some degree versus the euro and other G-10 currencies, with potential for a broader dollar sell-off,” said Steven Englander, Citigroup’s global head of G-10 currency strategy.
The euro rose 0.47% to $1.2716 while the dollar fell 0.18% against the yen, retesting its the 15 year-low reached on Tuesday.
Investors will also get a chance to hear what Bank of Japan Governor Masaaki Shirakawa has to say on the yen or monetary policy in Jackson Hole.
The dollar index, a gauge of the greenback’s performance against a basket of six major currencies, fell 0.47% to 82.872. It hit 83.556 on Tuesday, a six-week high.
The benchmark 10-year US Treasury rose 16/32 in price, yielding 2.48% after solid auction demand.
Benchmark US crude settled at $73.36, up 84 cents per barrel. Spot gold slipped $4.95 to $1,234.05
In world markets, European indices closed higher, while Asian markets ended mixed. In commodities, oil futures for October delivery were up 84 cents to $73.36 a barrel, while gold futures for December delivery fell $3.60 to $1,237.70. In bonds, the yield on the 10-year note slipped to 2.5% from 2.54% late Wednesday.