Cloudy outlook dents shares as yen strengthens

By Al Yoon

NEW YORK (BestGrowthStock) – World stocks fell on Monday on skepticism that governments can reverse a slowdown in global growth, while the yen rallied after Japan’s action to expand loans to banks disappointed investors who had wanted more aggressive measures to curb the currency’s rise.

Investors’ worries about the economy also weighed on the price of crude oil, while U.S. Treasury prices rose in a rebound from a sharp sell-off on Friday after Federal Reserve Chairman Ben Bernanke signaled that the U.S. central bank was not on the verge of a new round of bond buying.

U.S. President Barack Obama’s attempt on Monday to address worries the recovery is faltering appeared to fall short. U.S. stocks (Read more about the stock market today. ) extended an early slide, with all three major indexes closing down more than 1 percent.

A government report on Monday that U.S. consumer spending rose at the strongest pace in four months in July did little to reverse a bearish tone set by a string of other data suggesting the economy is slowing.

The Commerce Department data also showed that consumer spending, which typically accounts for about two-thirds of U.S. economic activity, was supported by a small rise in incomes.

Investors were also hesitant ahead of more closely watched data on manufacturing, services and August non-farm payrolls due later in the week.

European markets were subdued on Monday, with British markets closed for a bank holiday.

“Equity markets are going to be a little bit defensive this week as the economic data is likely going to show more slowing in the economy,” said John Brady, senior vice president at MF Global in Chicago.

At the close, the Dow Jones industrial average (.DJI: ) was down 140.92 points, or 1.39 percent, to 10,009.73. The Standard & Poor’s 500 Index (.SPX: ) dropped 15.67 points, or 1.47 percent, to 1,048.92 and the Nasdaq Composite Index (.IXIC: ) declined 33.66 points, or 1.56 percent, to 2,119.97.

Volume was the lowest for the year-to-date.

Sectors associated with economic growth took the biggest hits, including banks and consumer discretionary stocks. Citigroup (C.N: ) fell 2.4 percent to $3.67, while JP Morgan (JPM.N: ) fell 2.0 percent to $35.85. The KBW Bank Index lost 1.21 percent.

News on mergers and acquisitions bolstered some stocks, but was not enough to turn the market positive.

Genzyme Corp (GENZ.O: ) rose 3.39 percent to $69.91 after France’s Sanofi-Aventis SA (SASY.PA: ) disclosed a cash offer of $18.5 billion, or $69 per share, to buy the U.S. biotechnology company. Later, Genzyme broke a five-week silence to reject the bid.

Genzyme shares gained, but U.S.-listed shares of Sanofi (SNY.N: ) fell 1 percent to $28.63.

Expectations of increased mergers and acquisitions have buoyed stock markets in recent days as the activity often bolsters the equity of the parties or their sectors.

“There is a lot of cash still out there for a lot of these companies, and they need to start using it,” said Joe Saluzzi, co-manager of trading at Themis Trading in Chatham, New Jersey.

Intel Corp (INTC.O: ) agreed to buy the wireless unit of German chipmaker Infineon Technologies AG (IFXGn.DE: ) for $1.4 billion, enabling the U.S. chipmaker to boost its presence in the smartphone market. Intel shed more than 2 percent to $17.96.

MSCI’s all-country world stock index (.MIWD00000PUS: ) dropped 0.42 percent and the Thomson Reuters global stock index (.TRXFLDGLPU: ) fell 0.62 percent. MSCI’s emerging market sub-index (.MSCIEF: ) gained 0.23 percent.

In Europe, the FTSEurofirst 300 (.FTEU3: ) ended slightly lower, as the concerns about the global economic recovery outweighed support from the merger and acquisition news.

The pan-European FTSEurofirst 300 closed down 0.1 percent at 1,025.48 points. Trading was thin, with volumes on the index just 50.1 percent of the 90-day average.

Pharma shares featured among the best performers, with Sanofi-Aventis (SASY.PA: ) up 0.7 percent.

Japanese stocks closed up nearly 1.8 percent, but only after paring strong gains when the Bank of Japan made minor tweaks in policy, disappointing markets looking for more aggressive action against deflation. The yen rose broadly.

“The market was underwhelmed,” said Marc Chandler, global head of currency strategy at Brown Brothers Harriman in New York. “Japanese officials continued to struggle to get ahead of the curve of expectations.”

The yen hit the day’s high against the dollar and the euro after Bank of Japan Governor Masaaki Shirakawa said after meeting with Prime Minister Naoto Kan that Kan had not made any requests on the central bank’s monetary policy.

In late New York trade, the dollar was down 0.77 percent against the yen at 84.53 yen, matching its session low. The dollar rose 0.29 percent against a basket of currencies (.DXY: ). The euro fell (Read more about the trembling euro. ) 0.78 percent to $1.2662.

U.S. Treasury debt prices rose as traders clawed back some of Friday’s sharp losses, when Fed Chairman Bernanke signaled the U.S. central bank was not on the verge of a new round of bond buying.

Yields on benchmark 10-year Treasury notes was up 34/32, with the yield at 2.53 percent.

In commodities, U.S. light sweet crude oil fell 63 cents, or 0.63 percent, to settle at $74.70 per barrel. Gold rose 55 cents, or 0.04 percent, to $1236.70.

(Additional reporting by Jeremy Gaunt, Atul Prakash, Brian Gorman and Jessica Mortimer in London and Chuck Mikolajczak, Edward Krudy and Chris Reese in New York; Editing by Leslie Adler)

Cloudy outlook dents shares as yen strengthens