Alcoa fails to give world markets much of a lift

LONDON – European stock markets trimmed gains Thursday after Wall Street failed to react positively to a smaller than expected loss by aluminum company Alcoa Inc. Investors clearly want more evidence before subscribing to the view that businesses may have seen off the worst of the recession. In Europe, the FTSE 100 index of leading British shares closed up 18.43 points, or 0.5 percent, at 4,158.66 while Germany's DAX rose 57.42 points, or 1.3 percent, at 4,630.07. The CAC-40 in France was 16.23 points, or 0.5 percent, higher at 3,025.94. All three markets had been even higher earlier in anticipation of solid gains on Wall Street. In the event, U.S. stocks barely budged and the Dow Jones industrial average was down 13.45 points, or 0.2 percent, at 8,164.96 around midday New York time while the broader Standard & Poor's 500 index rose 1.21 points, or 0.1 percent, to 880.77. Key over the coming days and even weeks could be the second-quarter earnings reporting season as it will provide clues about whether companies have already seen the worst of the recession or whether they are still struggling in the first synchronized global economic downturn since the Second World War. Alcoa was the first Dow constituent to report in an after-hours statement Wednesday. Its loss of $454 million was narrower than analysts expected, and company executives attributed that outcome to efforts to slash costs and raise cash. They said some aluminum markets showed signs of improvement, but reiterated a forecast that worldwide aluminum consumption will shrink 7 percent this year amid the global recession. Investors don't appear to be that impressed by Alcoa's slightly better than anticipated performance. "One swallow doesn't make a summer," said Howard Wheeldon, senior strategist at BGC Partners. "We have stagnation staring us in the face and markets are likely to go on like this for months and months." Equities rose from the middle of March until the start of June on hopes that the U.S. economy in particular will recover from recession sooner than anticipated. But disappointing economic news over the last few weeks, culminating in last Thursday's worse than expected U.S. jobs report for June, has altered the mood prevailing among investors that a significant rebound in the U.S. was a possibility. Since peaking in early June, the S&P and the Dow Jones industrial average have dropped around 7 percent. "The second quarter earnings season promises to dictate sentiment over the next few weeks," said James Lord, an analyst at Capital Economics. "While the overall outlook for earnings is slowly improving, we would caution that the recovery is likely to take longer than widely expected." Earlier, Asian stocks turned in a shaky performance, with Japan's market notching its seventh straight loss after a spike in the value of the yen against the dollar. At one stage on Wednesday, the dollar had slumped around 3 yen to a near five-month low of 91.81 yen. The Japanese currency has been a big winner amid the economic uncertainty as it is widely considered a barometer of risk appetite in the markets in general — when investors are pessimistic, the yen gains a lot of support as it is considered a safe haven currency. The dollar was steady Thursday around 92.70 yen but the euro rose 0.8 percent to $1.3989. The Nikkei 225 stock average lost 129.69 points, or 1.4 percent, to 9,291.06 after the yen strengthened to its highest level in almost five months. That weighed on the broader market, with major exporters like Toyota and Sony losing between 2 percent and 3 percent. Hong Kong's Hang Seng rose 69.52, or 0.4 percent, to 17,790.59 in choppy trade, while South Korea's Kospi benchmark was virtually flat with a loss of just 0.13 point. In Australia, the main stock measure edged down 0.1 percent as the country's unemployment rate rose to a six-year high of 5.8 percent in June, showing that companies continued to shed workers despite the government's massive stimulus spending. Shanghai's index gained 1.4 percent. Stocks aren't the only asset to have suffered amid the mounting economic pessimism. Oil prices have fallen over $10 a barrel in just over a week as investors rein in their expectations of the speed of any global recovery. On Thursday, benchmark crude for August delivery was down 57 cents at $59.57.