GLOBAL MARKETS-Shares, euro slip as euro zone recession deepens

Thu Feb 14, 2013 4:37pm EST

* German GDP drop worst since 2009, France's also contracts
    * U.S., European indexes pare losses to end near break-even
    * U.S. Treasury debt rises on safe-haven appeal
    * U.S. crude rebounds on U.S. unemployment claims


    By Herbert Lash
    NEW YORK, Feb 14 (Reuters) - Global equity markets fell and
the euro slid against the dollar on Thursday after data showed
the euro zone slipped deeper into recession in late 2012 than
had been expected, but deal-making helped Wall Street close near
break-even.
    U.S. weekly jobless data and a $23.2 billion bid in cash by
Warren Buffett's Berkshire Hathaway and private equity
firm 3G Capital for ketchup and baby food maker H.J. Heinz
 helped turn sentiment about Europe and trim equity
losses.
    The euro tumbled to a three-week low against the dollar and
plunged against the yen after data on gross domestic product in
the euro zone painted a dismal picture of the regional economy.
 
    U.S. equities have struggled to break above current levels
where they have hovered for almost two weeks. The benchmark S&P
500 is up more than 6 percent so far this year.
    "While I'm not bearish, I don't see many upside motivations
at these levels," said Donald Selkin, chief market strategist at
National Securities in New York, who cited the low level of the
VIX as a sign the market was overbought. 
    "We need to digest some of our gains to go higher, but
people are so eager to buy on the dips that we're not even
seeing dips anymore. People are just chasing the market higher,"
said Selkin, who helps oversee about $3 billion in assets.
    The Dow Jones industrial average closed down 9.52
points, or 0.07 percent, at 13,973.39. The Standard & Poor's 500
Index rose 1.05 points, or 0.07 percent, at 1,521.38. The
Nasdaq Composite Index added 1.78 points, or 0.06
percent, at 3,198.66. 
    Global equities, as measured by MSCI's all-country world
equity index, fell 0.11 percent to 356.36.
    Berkshire and the private equity firm will pay $72.50 a
share for Heinz. Investors said the deal bodes well for
equities, even with the S&P 500 trading at five-year highs.
    "The only reason a company buys another company is because
they see an upside. Even though we are at multiyear highs, this
kind of activity shows that there is more room for a rally,
feeding optimism to the market," said Randy Frederick, director
of trading and derivatives at Charles Schwab.
    Shares of Constellation Brands soared 37 percent to
$43.75 after a revised AB InBev takeover of Mexican brewer Grupo
Modelo granted Constellation perpetual rights to
distribute Corona and other Modelo brands in the United States.
 
    AB InBev ADRs gained 5.1 percent to $92.76.     
    Economic output in the euro zone fell by 0.6 percent in the
fourth quarter, EU statistics office Eurostat said, while   
Germany contracted by 0.6 percent, marking its worst performance
since the global financial crisis was raging in 2009.
 
    The downturn marked the currency bloc's first full year in
which no quarter produced growth, extending back to 1995. For
the year as a whole, GDP fell by 0.5 percent.
    Germany is expected to rebound but the figures suggest the
bloc as a whole could remain in recession in the first quarter
of this year, despite a recent jump in market sentiment as fears
that the currency bloc could fall apart have faded.
    "The market has weakened because of the GDP numbers," said
Barclays commodities analyst Miswin Mahesh. "It's been a macro
sell-off this morning with the GDP numbers coming out, rather
than any fundamental move in itself. Most asset classes have
sold."
    "The jobless claims numbers were solid, and with the
European market closing, the news out of Europe is pretty much
done for the day," Frederick said.
    Initial claims for state jobless aid dropped 27,000 to a
seasonally adjusted 341,000, the Labor Department said, better
than markets had expected. 
    In Europe, the FTSEurofirst 300 index of top
companies slipped 0.17 percent to close at 1163.59, but the
index also pared losses on signs of increased dealmaking.
    British fund manager Aberdeen Asset Management 
unveiled two acquisitions, of a U.S. fund manager and a majority
stake in an international private equity business, to buy its
way into new markets. Shares rose 2.5 percent. 
    "A lot of companies, fearing about the systemic risk, have
been delaying investments for a long time," said Gilles Guibout,
head of euro zone equities at AXA Investment Managers, which has
554 billion euros ($739 billion) under management.
    "But now that this risk is gone, you could well see a sudden
catch up in capital expenditures as the companies put their cash
to work," Guibout said.        
    The yen rallied to session highs versus the dollar as
investors pared bearish bets on the Japanese currency. The
dollar fell as low as 92.92 yen and last traded at 92.85,
down 0.56 percent on the day.
    The euro fell 0.74 percent to $1.3354. 
    Oil prices initially fell after euro zone figures curbed
expectations of accelerating global growth and higher energy
demand. The stronger-than-expected drop in U.S. jobless claims
last week helped lift U.S. crude markets, and Brent rebounded to
trade slightly above break-even.
    Brent crude oil rose 12 cents to settle at $118.00 a
barrel. April Brent futures became the front-month contract on
Thursday. 
    U.S. crude rose 30 cents a barrel to settle at
$97.31.
    U.S. Treasuries yields edged back from 10-month highs on the
euro zone data, helping boost demand for safe-haven debt.
    The benchmark 10-year U.S. Treasury note was up
17/32 in price to yield 2.9983 percent.