Global Market Report 23 July 2012

Spain's debt worries rattled markets and tripped stocks for the first time in four sessions, as the financial sector helped drive the Dow's first triple-digit decline in two weeks.

The Dow Jones Industrial Average shed 120.79 points, or 0.9%, to 12,822.57, and the Standard & Poor's 500-stock index dropped 13.85 points, or 1%, to 1,362.66. The Nasdaq Composite Index lost 40.60 points, or 1.4%, to 2,925.30.

Eight of the S&P 500's 10 sectors lost ground, as financial stocks led the pack lower. Bank of America fell 19 cents, or 2.6%, to $7.07 and was the biggest decliner on the Dow.

Google gained 17.76, or 3%, to 610.82 after beating second-quarter earnings estimates, as losses stemming from newly acquired cellphone maker Motorola were more than countered by growing interest in ads placed on its Internet search engine.

Corporate earnings propelled a few blue chips to strong gains. General Electric inched up 7 cents, or 0.4%, to 19.87 after the bellwether conglomerate's earnings came in slightly better than estimates, though revenue missed.

Elsewhere, Microsoft fell 55 cents, or 1.8%, to 30.11 after posting its first quarterly loss in decades because of a previously announced charge for its Internet business, while the company showed signs of strength selling its software to corporations.

Disappointing economic news has prompted some strategists to urge clients to sell. But investors might be better off staying put, other experts say.

In another busy earnings week, several high-profile and blue-chip companies are on tap to report their latest quarterly results. Among them, consumer electronics giant Apple Inc. (AAPL) is projected to post another quarter of stronger profits and revenue, while social networking company Facebook Inc. (FB) will release its first earnings report since going public.

Also due this week are data on the second-quarter's gross domestic product and the initial public offerings of several companies, including Avast Software BV and Del Frisco's Restaurant Group LLC.

Concerns about the Spanish recession sparked a rally in US Treasurys, capping four consecutive weekly gains with the 10-year's yield now sitting on the cusp of new lows. At 7:45 AEST, the 10 Year Treasury note was 1.46%, and the 5 Year note was 0.57%.

European stocks posted broad-based losses, with Spanish equities plunging as government bond yields soared on renewed fears the country could be forced to seek a full-fledged sovereign bailout due to its debt burden.

The Stoxx 600 Europe index fell 1.4% to close at 258.17, paring the benchmark's weekly gain to 0.8%.

Analysts pointed to a combination of factors, including a decision by the Valencia regional government to seek a bailout from Spain's central government as well as revised economic forecasts by Spain's government.

Against this bearish backdrop, Spain's IBEX 35 index plunged 5.8% to 6,246.30.

Strategists said market participants also registered disappointment with provisions of a bailout plan for Spanish banks approved by euro-zone ministers. For now, liability for the package, which is expected to total as much as 100 billion euros, remains with the Spanish government.

Spain's Banco Santander SA dropped 7.3%, while shares of BBVA SA plunged 7.8%. And in Milan, Intesa Sanpaolo fell 6.5%, while UniCredit dropped 7.2%.

Italian government bonds also succumbed to pressure, sending the 10-year yield up 0.15 of a percentage point to 6.15%. Italy's FTSE MIB stock index dropped 4.4% to 13,067.20.

European banks succumbed broadly to selling pressure, with UBS AG falling more than 4% as HSBC Holdings PLC lost nearly 3%.

Shares of Vodafone Group PLC lost 1.7% in London, after the mobile-services giant reported worse-than-expected revenue for the first quarter.

Other telecoms fared worse, with shares of Telefonica SA trading down 7.4% in Madrid and Deutsche Telekom AG dropping 4.2% in Frankfurt.

Shares of Dutch brewer Heineken NV rose 0.8% in Amsterdam after it offered buy Singapore beverage firm Fraser & Neave Ltd.'s entire stake in Asia Pacific Breweries Ltd. for 5.1 billion Singapore dollars. Analysts said the move could trigger a takeover fight between Heineken and suitors tied to Thailand tycoon Charoen Sirivadhanabhakdi.

Shares of London Stock Exchange Group PLC dropped 1.6%, erasing an earlier gain after Singapore Exchange Ltd. denied it was in talks about a potential merger but said it was open to collaborations and partnerships that may benefit its shareholders. A representative from LSE declined to comment on the merger reports.

Shares of miner Anglo American PLC erased an earlier gain as markets came under pressure, ending the day down 0.3%. The company reported a 12% quarterly increase in iron-ore output to 12.9m tonnes.

The euro tumbled to multiyear lows against the US dollar, yen and other major currencies, amid growing concern that Spain's government could require financial help from its euro-zone neighbours.

Asian markets dropped, giving back some of the large gains made in the previous trading session, with Japan's Nikkei Average hitting a three-week low ahead of the start of the local corporate earnings season this week.

In Japan, some technology companies gained alongside their US peers. Toshiba climbed 1.1% and Fujitsu gained 0.9%.

The earnings boost didn't last for long, with markets turning downward as the day progressed as some investors were disappointed by weak employment data from the US that strengthened the conviction of some that the Federal Reserve will step in with further monetary stimulus, which hit the dollar and helped cap gains on stocks.

In China, Hong Kong's Hang Seng Index was up 0.4%, as gains in telecom stocks balanced against weakness in Hong Kong developers, while the Shanghai Composite fell 0.7% to 2,168.64.

Some caution in the Chinese property sector also appeared after fresh evidence that the government will remain tough on the housing market. State media cited an urgent official notice saying Beijing has ordered local authorities to strictly implement property control policies and rectify loosening that has already been made.

China Overseas Land & Investment fell 2.6% in Hong Kong, Evergrande Real Estate Group shed 0.5%, and Shimao Property Holdings dropped 1.8%.

New Zealand shares fell, led by OceanaGold and Auckland Airport as equity markets digested weaker data out of the United States and the prospects that the Federal Reserve will act to stimulate the world's largest economy. The market closed 0.6 percent lower with the benchmark NZX-50 index falling 22.07 points at 3,463.70.

Base metals closed lower on the London Metal Exchange, weighed by concerns over the impact of China's strict control over its housing market and the dollar's strengthening against the euro. Gold futures shook off early weakness to end modestly higher, as the rally in most agriculture commodities continued and some traders saw in it the threat of inflation.