Global stocks jittery ahead of earnings

By Manuela Badawy

NEW YORK (BestGrowthStock) – The euro fell (Read more about the trembling euro. ) broadly on Monday, as investors grew cautious on the health of European banks ahead of results of stress tests on the sector, while stocks struggled for direction ahead of the onset of the U.S. corporate earnings season.

The second-quarter earnings season was looming large for investors who are seeking a clearer picture of the economy’s prospects, as a fading recovery, persistently high unemployment in the United States, Europe’s debt troubles and commercial real estate losses have kept concerns of a double-dip recession alive.

Markets were also jittery about Europe’s fiscal issues and the health of its financial sector ahead of the stress tests on the continent’s banks — including many regional banks where markets suspect most of the sore spots lie — as it seeks to restore confidence in the sector.

China’s release of data showing a drop in demand for copper for a third straight month drove down the price of copper more than 2 percent and weighed on the price of mining shares on both sides of the Atlantic. China is the world’s top metals consumer, and the drop in demand cast a shadow on the demand outlook.

The euro fell (Read more about the trembling euro. ) against the dollar, pulling back from a two-month high, with investors betting recent gains were too far, too fast, while oil prices fell more than 1 percent as the dollar strengthened and ahead of corporate earnings results.

“Earnings season is a risk. The weaker euro will help internationally-exposed European companies, but not U.S. companies like Caterpillar (CAT.N: ),” said Heino Ruland, strategist at Ruland Research in Frankfurt. “So we could see a divergence.”

The Dow Jones industrial average (.DJI: ) edged up 4.31 points, or 0.04 percent, at 10,202.34. The Standard & Poor’s 500 Index (.SPX: ) eased 0.99 points, or 0.09 percent, to 1,076.97. The Nasdaq Composite Index (.IXIC: ) was off 0.97 points, or 0.04 percent, to 2,195.48.

The earnings season will kick off with Alcoa (AA.N: ) after the market close on Monday, and results from Intel (INTC.O: ), JP Morgan (JPM.N: ), Google (GOOG.O: ), Bank of America (BAC.N: ), GE (GE.N: ) and Citi (C.N: ) will follow later in the week.

Thomson Reuters data shows earnings of S&P 500 firms are expected to grow 27 percent in the second quarter from the previous three months, after expanding at a rate of 58.3 percent in the January-March period.

So far, with 26 of 500 firms already reported, 69 percent of earnings came in above expectations.

The S&P Materials index (.GSPM: ) slid 1.1 percent after the Chinese on falling copper demand, sending Freeport McMoRan Copper & Gold Inc (FCX.N: ) down 4.3 percent to $63.12.

The MSCI world equity index eased 0.18 percent.

In Europe, the FTSEurofirst 300 index (.FTEU3: ) eked out a gain, rising 0.3 percent for a fifth straight day of gains. Shares of BP (BP.L: ) surged 9.4 percent to their highest close in a month, boosted by reports of asset disposals to help pay for the oil major’s Gulf of Mexico spill and hopes for a new system to capture almost all the spewing oil.

EURO, COPPER FALL

The euro fell (Read more about the trembling euro. ) 0.52 percent to $1.2568, pulling away from last week’s two-month high as concerns about the effectiveness of stress tests on European banks prompted investors to trim long positions in the single currency.

The stress tests are being performed on 91 European banks, with results due on July 23, a major step as the European Union seeks to restore confidence in the sector.

“In the near term, the euro could suffer from any disappointment triggered by the stress tests,” said Gareth Berry, a currency strategist at UBS AG.

China’s trade surplus in June jumped on surprising strength in exports, but copper imports fell by 17.3 percent to 328,231 metric tones. Copper was traded at $6,641.75 a metric tone from $6,769 on Friday when it hit a near two-week high of $6,775.

Beijing is scheduled to release a slew of economic data for June later this week, including economic growth, inflation and industrial output, expected to shed light on the health of the world’s third-largest economy.

U.S. Treasuries were little changed ahead of the first of this week’s $69 billion worth of bond auctions. The Treasury will auction $35 billion of three-year notes at 1 p.m., the first of three sales which also include 10-year notes and 30-year bonds.

The benchmark 10-year U.S. Treasury note was up 10/32, with the yield at 3.0211 percent. The 2-year U.S. Treasury note was unchanged with the yield at 0.633 percent. The 30-year U.S. Treasury bond was up 17/32, with the yield at 4.0101 percent.

Analysts also are keeping a close watch on the auctions as the bond market remains relatively expensive after a three-month rally that has pulled benchmark yields below 3.0 percent from more than 4.0 percent at the start of April.

U.S. crude oil fell 1.42 percent to $75 a barrel ahead of corporate results.

(Additional reporting by Vivianne Rodrigues and Burton Frierson in New York and Brian Gorman in London; Editing by Leslie Adler)

Global stocks jittery ahead of earnings