Global stocks and metals fall
LONDON (Reuters) - World stocks and metal prices fell on Thursday after bleak data and poor corporate earnings fueled gloom about the economic outlook, while sterling rose after the Bank of England cut interest rates to a record low.
The BoE cut borrowing costs by 50 basis points to 1.5 percent as expected amid signs Britain is heading for a deep recession.
The financial crisis, triggered by a meltdown in the U.S. subprime mortgage market, has spread far and wide with the ensuing economic slowdown leading to higher unemployment and slowing exports.
Sterling rose about two U.S. cents to $1.5247 and firmed to a three-week high against the euro.
"I think it's pretty likely that it was sterling that decided them to slow down the pace of cuts," said Brian Hilliard, economist at Societe Generale. "I still think there's more (monetary easing) in the pipeline.
The euro fell 0.6 percent to $1.3569 but the dollar slipped more than 1 percent against the yen as falling share prices sapped demand for risky investments.
Reports showed economic sentiment in the euro zone plumbed record lows in December amid rising unemployment, and inflation expectations tumbled. That further strengthened the case for a European Central Bank rate cut next week [ID:nL8189665].
Also, German exports posted a record fall in November, as demand for cars and others mainstays of the manufacturing economy plummeted, compounding worries about the country's already bleak 2009 outlook [ID:nL88871].
ECB President Jean-Claude Trichet said in a magazine interview published on Wednesday there had been a significant deterioration in the euro zone economy in the last couple of months [ID:nN07498399].
Corporates, meanwhile, are shedding staff to save costs and are painting a darker picture of their earnings.
Intel Corp (INTC.O) on Wednesday cut its fourth quarter sales forecast for the second time, while EMC Corp (EMC.N), the world's biggest maker of data storage equipment for businesses, said it plans to cut 2,400 jobs, or 6 percent of its staff.
Global stocks as measured by the MSCI world index .MIWD00000PUS lost 1.1 percent, with the pan-European FTSEurofirst 300 .FTEU3 shedding 0.9 percent and Tokyo's Nikkei average .N225 down 3.9 percent.
Futures on U.S. Dow Jones industrial average and the S&P 500 pointed to a weaker opening while Nasdaq futures were also lower.
SLICK OIL, DULL METALS
Oil prices held around $43 a barrel on escalating violence in the Middle East, after tumbling overnight.
Several rockets fired from Lebanon struck northern Israel on Thursday, slightly wounding two police, in an attack seen as linked to Israel's war on Hamas Islamists in the Gaza strip. Metal prices, however, headed south on concerns over demand in a tough economic environment. Yields on benchmark 10-year U.S. Treasuries were steady, but yields on the 10-year Bund narrowed 3 basis points.
The premium in European corporate debt, which are seen as risky as equities, also fell. The Markit iTraxx Crossover index, made up of 50 mostly "junk"-rated credits, was at 961 basis points, 12 basis points tighter versus late on Wednesday.
Morgan Stanley said in a report on Europe's economy that it preferred investment grade corporate bonds over equities because more bad news had been priced in.
"In interest rates, market face a range of non-traditional government interventions, from bank capital injections to quantative easing, which can and will distort markets," the broker said.
"Markets will have to absorb an unprecedented amount of government borrowing, which together with further central bank easing should steepen the yield curve eventually."
