Global Market Report 14 June 2012

Stocks sank into the red in late trading on Wednesday, as worries about Europe and weak US data eclipsed earlier optimism about financial stocks' outlooks.

The Dow Jones Industrial Average dropped 0.6%, or 77.42 points, to 12,496.38. Midday, it briefly edged above 12,598. The Standard & Poor's 500-stock index fell 9.3 points, or 0.7%, to 1,314.88, and the Nasdaq Composite fell 24.46 points, or 0.9%, to 2,818.61.

Concerns about the strength of Europe's economy moved to the forefront in late afternoon trading, as the Dow Industrial Average fell more than 100 points to its intraday lows. Major indexes recouped some of their losses before the close, but stocks remained in negative territory on jitters about demand for Italian bonds in an upcoming auction and reports of more Greek bank withdrawals ahead of the country's elections this Sunday.

US retail sales slipped for the second consecutive month in May, the first consecutive-month decline in nearly two years. While the measure fell by less than expected in May, April retail sales were revised down into negative territory.

Stocks saw gains in the first half of the day, as JP Morgan Chase Chief Executive James Dimon testified in front of a Senate panel. The questioning was less contentious than expected, which stoked hopes that banks wouldn't see extensive regulatory fallout from JP Morgan's trading loss of more than $2 billion.

In corporate news, Dell led companies in the S&P 500, rising 2.6% after the computer maker said it plans to start paying a quarterly cash dividend of 8 cents a share.

Johnson & Johnson gained 2.2%. The blue chip health-care company said it received regulatory clearance to close its $19.7 billion bid for medical-device maker Synthes. Analysts subsequently upgraded the stock, recommending investors buy it.

Facebook edged down 0.5%. It spent much of the day in positive territory, but still hasn't posted a back-to-back gain since the week after its initial public offering.

Scotts Miracle-Gro slid 6.6% after announcing it expects to fall short of estimates of full-year earnings and sales growth it had provided earlier.

3D Systems fell 7.4%. The company said it is offering shares of its common stock for sale to the public.

Concerns about the US economy pushed investors into the safety of US Treasurys, helping the government raise debt at the lowest cost in the history of 10-year auctions. The record-low 1.622% yield didn't deter investors from showing up and was actually lower than what buyers expected to get paid, based on the going market rate at the time of the sale. At 7:45 AM (AEST), the 10-year Treasury note yield was 1.59% and the 5-year yield was 0.70%.

The euro is paring earlier gains but is still up about 0.4% on the day after Moody's cuts Spain's bond ratings to Baa3, the lowest investment grade rating Moody's offers, from A3. The US currency had earlier been weighed by a pair of reports which signalled potentially more weakness in the US economy, while more sanguine sentiment ahead of the Greek elections this weekend helped underpin the euro.

Losses in shares of big manufacturing companies and miners drove Europe's stock markets lower amid weak euro-zone and US data, though Spanish stocks bucked the trend after retailer Inditex SA zipped higher on upbeat results.

The Stoxx Europe 600 index closed 0.4% lower at 242.56. Markets dipped deeper into negative territory in afternoon action after US retail sales data.

SKF AB dropped the most in the pan-European index, off 7.3%, after the maker of rolling bearings cut its second-quarter forecast due to weaker market conditions in Western Europe and Asia.

The announcement stirred concerns that profit warnings from other industrials such as Swedish machinery firm Sandvik AB and Atlas Copco AB would follow. Shares of Sandvik dropped 5.3%, while those of Atlas Copco fell 3.4%.

Major industrial companies and miners were also weighed by news of a 0.8% drop in euro-zone industrial production in April from March.

In Germany, Siemens AG gave up 1.4%, weighing on the DAX 30 index which slipped 0.1% to 6,152.49. Car makers also weighed on sentiment, with Daimler AG down 2.1%, Volkswagen AG off 1.8% and BMW AG 1.3% lower.

In France, power and transport firm Alstom SA gave up 5%, while Schneider Electric SA slid 5.1%. The French CAC 40 index fell 0.6% to 3,030.04.

Outside the main index, shares of Establissements Maurel & Prom SA were the top Stoxx 600 gainer, up 17.7% on reports that Royal Dutch Shell PLC is interested in buying the French oil group.

The FTSE 100 index added 0.2% to 5,483.81. SSE PLC rose 2.1% after analysts lifted the stock to overweight from equal weight. Miners weighed on the index: Xstrata PLC fell 5.2% and Eurasian Natural Resources Corp. lost 1.3%. Vedanta Resources PLC fell 2.6% in London.

Spanish retailer Inditex SA rose 11.6% after first-quarter results beat forecasters' expectations. The gain helped lift the IBEX 35 index 1.4% to 6,615.30.

The Athens General Index rose 2.1% to 499.56. The leader of anti-austerity party Syriza, Alexis Tsipras, said in a post on the Financial Times that he is committed to keeping Greece in the euro zone and that "the need for giving Greece a chance for real growth and a new future is now more widely accepted than ever."

Asian stock markets rose, as investors weighed the chances of global policy action with worries about developments in Europe in the run-up to this weekend's election in Greece.

Japan's Nikkei Stock Average rose 0.6%, the Shanghai Composite Index added 1.3%, and Hong Kong's Hang Seng Index gained 0.8%. South Korea's Kospi rose 0.3%.

Optimism that policy makers would step in to limit the fallout from Europe to the global economy helped gold and oil futures gain, along with US stocks, and gave a boost to commodity-related shares in Asia.

Gainers in the sector included Sumitomo Metal Industries Ltd., up 2.5%, and Toho Zinc Co., up 2.1% in Japan.

Oil giant Cnooc Ltd. fell 1% in Hong Kong, as benchmark US crude-oil futures pared gains in Asian morning trade.

Huaneng Power International gained 5.7% and New China Life Insurance jumped 10%.

Japanese machinery stocks got a mild boost from April data showing core machinery orders rose a stronger-than-expected 5.7%. Fanuc Corp. rose 0.4% and Denso Corp. was up 0.9%.

Canon Inc. fell 1.1% after Credit Suisse cut its price target for the shares.

Among decliners, Hong-Kong-listed apparel firm Esprit plummeted 21.8% after the firm announced Chief Executive Officer Ronald van der Vis would resign for personal reasons, effective July 1.

Base metals closed mixed on the London Metal Exchange as concerns over the global economy continued to keep a lid on prices.

Crude oil futures prices settled at a fresh eight-month low ahead of a meeting to discuss oil output among the Organization of Petroleum Exporting Countries.

Gold rose slightly on the weaker US dollar, though euro-zone worries reined in its rise as investors turned to Treasurys for security.