Markets take a breather ahead of U.S. bank earnings

Apr 12, 2013, 6:37 AM EDT
People walk in front of an electronic stock indicator in Tokyo, Thursday, April 11, 2013.
(AP Photo/Shizuo Kambayashi)

LONDON (AP) — Markets gave up some their recent gains Friday in the run-up to key U.S. bank earnings and a report on the country's retail sales that should shed some more light on the state of the world's largest economy.

Following a strong run on Wall Street, which has seen the main two stock indexes record a series of record highs, investors around the world appear to be taking a breather. The state of the U.S. economy could be central to their assessments for the rest of 2013.

It's not just Wall Street that has ground higher — many European indexes are near multi-year highs even though many countries there are in recession and the region's debt crisis flares up at regular intervals. Meanwhile, Japan's Nikkei has been riding high following an aggressive new approach from the country's central bank.

Stocks, particularly on Wall Street, have been resilient ever since last Friday's disappointing nonfarm payrolls data. Later, investors will focus on the March retail sales report — the consensus in the markets is for a flat reading following the previous month's 1.1 percent gain.

"This would seem a rather sharp fall, even accounting for last week's disappointing payrolls numbers and fall in consumer confidence," said Michael Hewson, senior market analyst at CMC Markets.

Ahead of that report, European stocks were trading lower while Wall Street was poised for a modest retreat.

In Europe, the FTSE 100 index of leading British shares was down 0.6 percent at 6,378 while Germany's DAX fell 1.4 percent to 7,763. The CAC-40 in France was 1.1 percent lower at 3,736.

In the U.S., Dow futures and the broader S&P 500 futures were pointing to a 0.2 percent fall at the open, though how they actually trade could hinge on the retail sales figures as well as earnings from JP Morgan Chase and Wells Fargo Bank.

Fawad Razaqzada, market strategist at GFT Markets, said the earnings may only a have stock-specific impact given that sentiment across markets seems "hugely difficult to derail."

The subdued tone was evident in other financial markets too, with supposedly riskier assets under some pressure. The euro, for example, was trading 0.5 percent lower at $1.3044 even though industrial production across the 17 European Union countries that use the currency, rose by a monthly rate of 0.4 percent in February, double market expectations. Euro watchers in the markets will also be keeping an eye on an informal meeting of European finance ministers in Dublin, Ireland.

Earlier in Asia, Japan's Nikkei 225 index retreated 0.5 percent to close at 13,485.14, a slip from the day before when the Tokyo benchmark closed above 13,500 for the first time since August 2008. The Nikkei has surged on the back of the Bank of Japan's aggressive new approach to jolting the world's third-largest economy out of a prolonged slump.

The dollar, which has been surging against the yen following the Bank of Japan's new policy prescription, gave up some recent gains, trading 0.7 percent lower at 98.99 yen. The yen's fall has been a key reason behind the Nikkei's advance as it potentially makes the country's exports cheaper in international markets.

Elsewhere, South Korea's Kospi tumbled 1.3 percent to 1,924.23, as jitters persisted over tensions on the Korean Peninsula. India's Sensex fell 1.5 percent to 18,269.16 while mainland Chinese shares were nearly unchanged. Hong Kong's Hang Seng fell 0.1 percent to 22,089.05.

The price of oil was soft too with the benchmark New York rate down 65 cents at $92.86 a barrel.