Global stocks slip as earnings, China weakness weigh

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 slumped 13% after warning about its earnings, and financials were hit as Swedish banks missed earnings expectations and Credit Suisse announced plans to raise six billion Swiss francs ($6.29 billion) capital after missing expectations also.

Chinese bourses gave up earlier gains to close down 3%, the biggest fall since 15 September. Resources and energy stocks in Europe took their cue from China’s weakness and were among the biggest losers in early trading, In bonds, the cautious mood made for slightly lower yields, while commodities prices fell – copper futures were down 1% and crude oil futures were down more than 1%.

“This is a response to the late sell-off in China,” said Craig Erlam, senior market analyst at Oanda in London.

“It was reminiscent of the kind of heavy selling that we saw back in August when emerging market concerns were very high, which in turn weighed on sentiment in Europe,” he said. In early trading the FTSEuroFirst index of leading 300 European shares was down two thirds of one percent at 1,423 points .FTEU3. Pearson and Credit Suisse were the two biggest losers, down 14% and 4.5%, respectively. Germany’s DAX was down 0.2%, France’s CAC 40 was down 0.5% and Britain’s FTSE 100 was down 0.3%. In Asia MSCI’s broadest index of Asia-Pacific shares outside Japan slipped 0.3%.

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 by almost 2% to 18.554 points.

Gold retains gains near $1,175 on sluggish dollar

Gold retained overnight gains on Wednesday, as a softer dollar increased the metal’s appeal as a hedge, with investors waiting for stronger clues on when the Federal Reserve will raise US rates.

Spot gold was little changed at $1,174.90 an ounce by 0643 GMT. The metal gained 0.5% in the previous session, snapping a three-day losing streak.

Bullion gained as the euro rose against the dollar on Tuesday, bolstered by solid regional economic data and comments from European Central Bank (ECB) officials suggesting further monetary easing may not be imminent.

A weaker greenback makes dollar-denominated gold cheaper for holders of other currencies, while also increasing its appeal as a hedge. Sluggishness in equity markets also triggered some safe-haven bids for gold.

With gold now close to its 200-day moving average near $1,175, some expect more gains though trading could be quiet ahead of the ECB policy meeting on Thursday and Fed meeting next week.

Bullion’s rise above its 200-day moving-average “is a technical sign, no doubt, suggesting some upside risk for gold,” said OCBC analyst Barnabas Gan.

“(But) a potential higher interest rate environment, better growth story into 2016, are strong fundamental drivers underpinning a bear gold story going forward,” Gan said.

Despite the overnight gains, gold was still trading below a 3-1/2-month high of $1,190.63 hit last week, held back by uncertainty over the timing of the first US rate hike in nearly a decade.

Market expectations for a hike have shifted to next year in recent weeks amid concerns about the global economy, although some haven’t completely ruled out a rate rise in December on recent robust US economic data.

Data on Tuesday showed US housing starts rose solidly in September on soaring demand for rental apartments, a sign that the housing market continues to steadily improve.

Investors will be closely monitoring US data and comments from Fed officials on monetary policy to gauge when the central bank would raise rates. The Fed holds two more policy meetings this year: next week and in December.

Gold prices are expected to slip to $1,159.88 by October 2016, delegates to the London Bullion Market Association’s annual gathering predicted on Tuesday.