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GLOBAL MARKETS-European earnings, China's weakness drag on stocks

Published 21/10/2015, 08:33 pm
© Reuters.  GLOBAL MARKETS-European earnings, China's weakness drag on stocks
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* China's biggest stocks loss in over a month

* Japan recession fears rise

* European banks' earnings drag

By Jamie McGeever

LONDON, Oct 21 (Reuters) - European stocks fell on Wednesday, dragged lower by negative third quarter earnings reports and the biggest fall in Chinese stocks in over a month.

British publisher Pearson PSON.L slumped 16 percent after warning about its earnings, and financials were hit as Swedish banks missed earnings expectations and Credit Suisse CSGN.VX announced plans to raise 6 billion Swiss francs ($6.3 billion) in capital. ID:nL8N12L099

Chinese bourses gave up earlier gains to close down 3 percent, the biggest fall since Sept. 15. Resources and energy stocks in Europe took their cue from that weakness and were among the biggest losers in early trading .SXPP .

Commodity prices fell, while the cautious tone made for lower yields across major government bond markets.

"A mixture of disappointing corporate results and continued pressure from the commodity sector has sent stocks lower," said David Madden, market analyst at IG in London.

"Equity markets have suffered a few severe sell-offs since the summer and they are still nervous, and an absence of positive news is seen a negative," he said.

In mid-morning trade the FTSEuroFirst index of leading 300 European shares was down two thirds of one percent at 1,423 points .FTEU3 . Pearson was the biggest loser, down 16 percent PSON.L , and Credit Suisse was down 4 percent. ID:nL8N12L099

Germany's DAX was flat .GDAXI , France's CAC 40 was down 0.5 percent .FCHI and Britain's FTSE 100 .FTSE was down 0.3 percent.

In Asia MSCI's broadest index of Asia-Pacific shares outside Japan .MIAPJ0000PUS slipped 0.3 percent.

In Japan, the slowest growth in exports in over a year fuelled talk of recession but the prospect of more stimulus from the Bank of Japan lifted the Nikkei 225 to its highest since Sept. 9, ending up 1.9 percent at 18,554 points .N225 . ID:nL3N12I05T

U.S. futures pointed to a slightly higher opening on Wall Street of up to 0.2 percent ESc1 , essentially reversing Tuesday's small losses.

ECB TO STAY PUT?

Earnings for S&P 500 companies are expected to have fallen about 4 percent in the third quarter, while revenue is expected to have declined 3.8 percent, according to Thomson Reuters data.

Economic news from the United States was moderately upbeat as housing starts increased 6.5 percent in September to an annual pace of 1.21 million units, beating expectations for 1.15 million units.

There was also better news on bank lending in the euro zone as data from the European Central Bank on Tuesday showed a further easing in credit conditions and improving demand for loans.

That might lessen the need for the ECB to immediately ramp up its 1 trillion euro asset purchase program. ID:nL8N12K1EW

The ECB's governing council meets on Thursday and markets expect it to highlight a willingness to act to boost inflation, but not just yet.

"Actions are highly unlikely this week. But its words will need to confirm a strong dovish bias that keeps the ECB on track for extra QE (quantitative easing) in December if the market is to keep its composure," Royal Bank of Scotland (L:RBS) analysts wrote in a client note on Wednesday.

The euro was a whisker higher at $1.1355 EUR= , but still hemmed in by support at $1.3300 and resistance around $1.1386. The dollar index was last down 0.1 percent at 94.841 .DXY .

The Australian dollar was the biggest mover among the major currencies, under pressure from the weakness in Chinese stocks and world commodity prices. It was last down 0.5 percent at $0.7220 AUD= .

Oil prices softened on speculation U.S. inventory data would only underline the extent of oversupply in the world. The U.S. Energy Information Administration (EIA) will report official inventory data on Wednesday.

U.S. crude CLc1 fell 1.5 percent to $45.60 per barrel, while Brent LCOc1 lost 0.8 percent to $48.31.

In bonds the 10-year U.S. Treasury yield was down almost 3 basis points at 2.045 percent US10YT=RR .

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