- The Washington Times - Monday, April 6, 2009

LONDON (AP) — European stock markets pared most of their earlier gains Monday as Wall Street headed for a lower opening amid concerns over the upcoming U.S. corporate earnings season and reports that IBM Corp. has walked away from a takeover of Sun Microsystems Inc.

The FTSE 100 index of leading British shares was up only 3 points, or 0.1 percent, at 4,032.67, while Germany’s DAX was 28.42 points, or 0.7 percent, higher at 4,413.41. The CAC-40 in France rose 12.46 points, or 0.4 percent, at 2,971.20.

All three indexes had been trading higher earlier in the session amid hopes that the rebound in global stock markets would continue into a fifth week following earlier Asian gains.

However, Wall Street futures turned lower and pushed European stocks off earlier highs.

Investors in the U.S. will begin poring over first-quarter earnings for more clues on where the economy is headed — and analysts warn that worse-than-expected reports could rattle the market.

Also hitting sentiment in the U.S. was the news that IBM had pulled its offer for Sun amid price disagreements and Sun’s demand that IBM commit to seeing the deal through expected regulatory scrutiny.

Dow futures were 23 points, or 0.3 percent, lower at 7,960 while the broader Standard & Poor’s 500 futures fell 3.5 points, or 0.4 percent, to 838.10.

Analysts said losses are unsurprising given that the Dow, for example, closed Friday at 8,017.59, its highest close since Feb. 9. It’s now 22.5 percent above its March trough and in the middle of its biggest four-week rally since 1933.

The rally in global stocks over the last few weeks has been triggered by some tentative signs that the worst of the economic downturn could be over though any recovery will take time to show up in corporate earnings or economic indicators like unemployment.

“Markets tend to recover before the economy but despite the green shoots of recovery being either hallucinations for some or wildly embryonic for others, there are likely to be some serious setbacks along the way, leaving investors challenging the recovery of the economy,” said David Buik, senior strategist at BGC Partners.

“Equities are likely to bob around like a cork in a bath for the next 3 months,” he added.

Of late, investors have seemingly looked on the bright side, apparently confident that the raft of measures undertaken by governments and central banks around the world have been a suitable response to the worst financial crisis since the 1930s. Japan’s government earlier ordered more than 10 trillion yen ($99 billion) in fresh spending to rescue the world’s second-biggest economy from its deepest recession since World War II.

“A selection of recent figures has nonetheless given some weight to the embryonic notion that the global economic contraction is beginning to slow,” said Neil Mellor, an analyst at Bank of New York Mellon.

That improved stock market sentiment was evident in the response to HSBC PLC’s 12.9 billion pound rights issue. The bank said nearly 97 percent of the shares had been taken in the offer and that the remainder have been sold in the market. HSBC’s share price rose over by over 5 percent at one stage before the wider market retreat left it only 3 percent higher.

Earlier in Asia, investors brushed aside news of North Korea’s launch of a long-range missile, with Japan’s Nikkei 225 stock average closing up 108.09 points, or 1.2 percent, to 8,857.93, and Hong Kong’s Hang Seng index ending 452.35, or 3.1 percent, higher at 14,998.04 to lead the region.

Elsewhere in Asia, India’s Sensex climbed 1.9 percent, Australia’s key index gained 0.6 percent and Singapore’s stock measure rose 1.3 percent. Markets in mainland China, Thailand and the Philippines were closed for holidays. South Korea’s Kospi advanced 1.1 percent to 1,297.85.

Among Asia’s best performers was Mazda, which went into overdrive with the Japanese carmaker surging over 10 percent, while electronics maker Panasonic added 2.3 percent.

The expected modest retreat on Wall Street pushed oil prices back below $53 a barrel. Benchmark crude for May delivery fell 30 cents to $52.21 a barrel.

In currencies, the dollar fell to 100.98 yen from 101.28 yen, while the euro dropped to $1.3486 from $1.3483.

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