Global Market Report 25 January 2012

Stocks declined, as investors eyed a standoff in Greece's debt-reduction talks and mixed quarterly earnings from a basket of major companies.

The Dow Jones Industrial Average was recently down 33 points (0.3%) to 12,676. The Dow was on pace to post its second consecutive decline for the first time in nearly three weeks.

The Standard & Poor's 500-stock index shed one point (0.1%) to 1,315, and the Nasdaq rose two points (0.1) to 2,787.

Data pointed to economic resilience in the euro zone, with a survey showing manufacturing activity improving for a third month. Still, the International Monetary Fund trimmed its global growth estimates for the year to 3.3%, warning that the euro-zone debt crisis could shave roughly two percentage points off world-wide output if there isn't a resolution soon.

The day was full of companies reporting their earnings.

McDonald's fourth-quarter earnings rose 11% as the fast-food company beat analyst expectations, with new product offerings driving same-store sales and revenue growth. Still, shares fell 2.3% after hitting an all-time high last week.

Travelers lost 3.2% after the insurer reported fourth-quarter earnings that missed forecasts although revenue was well above expectations.

Verizon Communications shed 2% after the wireless carrier's fourth-quarter earnings came up shy of estimates. Verizon's decline trickled through other telecommunications stocks, which lagged all sectors on the S&P 500.

Other Dow components edged higher. Johnson & Johnson rose 0.1% after the consumer-products company reported fourth-quarter earnings and revenue that exceeded expectations, but provided a 2012 earnings outlook that was below current estimates.

E.I. DuPont de Nemours rose 0.1% after the diversified manufacturer's fourth-quarter earnings topped estimates, though revenue fell a bit short.

The technology sector provided a pocket of resilience Tuesday and was among the S&P 500's best-performing sectors.

VMware reported late Monday that fourth-quarter earnings rose 67%, allaying fears of waning business demand as companies continued to invest heavily in technology for cloud computing. Shares rose 7.8%.

EMC gained 6.7% after the data-storage provider's fourth-quarter earnings and revenue topped forecasts and its 2012 projections were in line.

Waters led the S&P 500 gainers after reporting fourth-quarter earnings rose 8.3% as the laboratory-equipment maker continued its sales growth streak, though margins edged lower. Shares were up 8.4%.

At 7:45 AM (AEST), the 10-year Treasury note yield was 2.06% and the 5-year yield was 0.90%.

European stock markets ended lower on Tuesday as European finance ministers pressured Greece's private creditors to accept lower interest rates on restructured Greek government debt.

The Stoxx 600 index fell 0.4% to close at 256.04, pulling back from a five-month high set the previous session.

In Britain, the FTSE 100 slipped 0.5% to end at 5,751.90, while the German DAX 30 settled 0.3% lower at 6,419.22. The French CAC 40 shed 0.5% to close at 3,322.65.

Shares across Europe were pressured as Greece has yet to conclude debt talks with its private debtholders to write down the country's debt by EUR100bn.

Greek Finance Minister Evangelos Venizelos said in a statement that euro-zone finance ministers had given Greece the "green light" to conclude talks with debt holders within a few days.

Creditors have pushed for a coupon around 4% under what would be a voluntary debt swap.

The European Union and others, in turn, have pressed for a coupon rate of no more than 3.5%, arguing that a higher rate would make it impossible to put Greece on a sustainable fiscal footing.

A resolution is crucial as Greece must repay EUR14.5bn of maturing debt in March to avoid a default.

Elsewhere, earnings reports from heavyweight blue chips were weighing on sentiment across Europe.

Shares of Koninklijke KPN NV sank more than 7% after the Dutch telecom carrier reported sharply lower net profit for the fourth quarter and cut its 2012 outlook.

Nokia Corp. sank 6.9% after Danske Bank reportedly downgraded the handset maker and a supplier warned of lower sales. The Finnish company reports fourth-quarter results on Thursday.

Banking shares were also falling in Europe on Tuesday. Deutsche Bank shed 1.8%. The German bank was cut to neutral from overweight by J.P. Morgan Cazenove on valuation grounds. Also in Germany, Commerzbank AG fell 2.8%.

In Paris, Credit Agricole SA traded down 4.1%, while Societe Generale SA plunged 5.4% as both banks' ratings were cut to A from A-plus by Standard & Poor's Ratings Services.

In London, Royal Bank of Scotland PLC declined 3.9%, Lloyds Banking Group PLC pulled back 2.8% and Barclays PLC lost 1.9%.

Trading volumes were quiet, with stock markets in Hong Kong, mainland China and South Korea among those closed for the Lunar New Year holiday.

The Nikkei Stock Average closed up 0.2%, India's Sensex was 1.6% higher and Thai shares added 0.5%.

The NZX-50 closed down 0.8% at 3,268.17 on weakness in a couple of heavyweight stocks.

Base metals closed mixed on the London Metal Exchange on Tuesday after a session in which the euro whipsawed against the dollar and market participants pitted concerns over Greece's crucial debt-restructuring talks against expectations of tightening fundamentals. Aluminium rose $1 (0.04%) to $2,239 while copper fell $5 (0.06%) to $8,360 and nickel firmed $295 (1.45%) to $20,600. Zinc added $66 (3.21%) to $2,125 and lead strengthened $6 (0.27%) to $2,250. Comex copper was last quoted at 381.15 US cents per pound.

Gold futures closed below $1,665 an ounce, pulling back from a six-week high to post their first loss in three sessions on strength in the dollar and a lack of buying support from Chinese markets due to the Lunar New Year holiday there. Spot gold was last quoted at $1,664.80. Comex gold futures shed $13.80 (0.82%) to $1,664.50. Spot silver was last quoted at $31.96.

Crude-oil futures fell back below $99 a barrel on Tuesday, pressured by strength in the US dollar as traders eyed negotiations over Greece's debt crisis and continued to mull the impact of the European Union's oil embargo on Iran. West Texas Intermediate was last quoted at US$98.65 per barrel.