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Stocks fall in Europe and Asia

Reports on retail sales and the service industry add to concern that the first global recession since World War II will persist.

July 04, 2009|Bloomberg News

Stocks fell in Europe and Asia on Friday, extending the MSCI World Index's longest weekly losing streak since March, as reports on retail sales and the service industry added to concern that the first global recession since World War II will persist.

U.S. markets were closed for the Fourth of July holiday.

Metro AG, Germany's biggest retailer, slipped 2.5% as European retail sales dropped more than economists estimated. Seven & I Holdings Co., Japan's largest retailer, sank 5% after saying profit fell 28%. Teck Resources surged 8.1% in Toronto, leading Canadian stocks higher, after the company sold a stake to China's sovereign wealth fund.

The MSCI World lost 0.1% to 946.80 as 12 stocks fell for every seven that rose. The gauge of 1,654 companies in 23 developed nations slipped 1.8% this week as the U.S. lost more jobs than projected.

"People realize the economy isn't as bright as expected," said Franz Wenzel, deputy director of investment strategy at Axa Investment Managers in Paris, which oversees $678 billion. "Over the next couple of weeks or even months, the stock market will trade sideways at best."

Europe's Dow Jones Stoxx 600 index fell less than 0.1% as eight stocks declined for every five that advanced. The measure has slipped 5% since June 11 on speculation that share prices have outpaced the outlook for economic growth after a three-month rally pushed valuations to 25.6 times earnings, the highest level since 2004.

Asia, Canada

The MSCI Asia Pacific Index declined 0.2%, leaving it with a drop of 0.8% since June 26.

Canada's S&P/TSX composite index climbed 0.4% as raw-material producers advanced, trimming its weekly drop to 1%.

The dollar posted a weekly gain against the euro as speculation that the economic recovery is faltering boosted demand for the safety of the U.S. currency. The British pound fell against the dollar, declining for the first week in a month, after a report showed Britain's service industries were little changed in June as the recession persisted.

Earnings season

The second-quarter U.S. earnings season will kick off next week with Alcoa Inc., the largest U.S. aluminum producer, reporting Wednesday. Analysts estimate that profits in the Standard & Poor's 500 declined 34% in the second quarter and will slump 21% on average in the third before rebounding 61% in the final three months of the year, according to Bloomberg data.

Investors will monitor the Treasury's auctions next week to see if demand holds up as President Obama pushes the nation's marketable debt to an unprecedented $6.45 trillion.

The Treasury will hold four auctions next week for the first time to sell $73 billion of notes, bonds and inflation-protected securities as the U.S. accelerates debt sales to finance a record budget deficit.

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