European stocks slump despite upbeat US data

Traders observe a moment of silence on the floor of the New York Stock Exchange from 9:20am to 9:21am yesterday for the victims and families of the Boston Marathon bombings on Monday. The Dow Jones Industrial Average gained 0.87% to 14,726.48 points in midday trading yesterday.

AFP/London

European stock markets closed lower yesterday as upbeat US data failed to take investor’s minds off of weaker economic prospects for the global economy.

London’s benchmark FTSE 100 index of top companies slid 0.62% to 6,304.58 points while in Paris the Cac 40 was off by 0.67% at 3,685.79.

Frankfurt’s Dax 30 lost 0.39% to 7,682.58 points as dealers also digested news that German investor sentiment fell by more than expected in April.

In Madrid, the Ibex-35 fell by 0.82% to 7,948.7 points, while in Milan the FTSE Mib was 0.61% lower at 15,533 points.

“Mounting concerns about the global economic outlook and events in Boston have triggered a flight to quality,” said RIA Capital Markets analyst Nick Stamenkovic.

The IMF cut its world growth forecast for 2013 yesterday as the eurozone recession continued to drag, but predicted growth overall would pick up in the second half of the year.

In its newest assessment of the global economy, the International Monetary Fund said world output would expand by 3.3% this year, compared with the 3.5% it predicted in January.

On other financial markets, “the dollar has benefited from its safe-haven status, with commodity prices losing ground,” Stamenkovic added.

In foreign exchange activity, the US dollar rebounded to ¥97.77 from ¥96.72 late on Monday in New York. The euro, meanwhile, also climbed to $1.3136, from $1.3036.

In the wake of twin explosions on Monday at the Boston Marathon which killed at least three and wounded more than 170, cities from New York to Los Angeles went on high alert, and traders were initially skittish.

They seemed to have recovered some of their poise by yesterday however, and US stocks rallied in midday trading in New York.

The Dow Jones Industrial Average gained 0.87% to 14,726.48 points, while the broad-based S&P 500 jumped 1.10% to 1,569.47, and the tech-rich Nasdaq Composite Index added 1.23% to 3,256.17.

Among the positive US news was data showing that housing starts climbed to 1,040,000 in March from 917,000 in February, smashing analysts’ expectations.  

“The new home construction data climbed more than 7.0%, the most since June 2008 as builders rush to satisfy growing demand for rental properties,” noted Lee Mumford at Spreadex.com.

Solid earnings reports from Goldman Sachs, Coca-Cola and Johnson & Johnson also helped to propel stocks higher.

At the evening fixing on the London Bullion Market, an ounce of gold cost $1,380. It had earlier plunged to $1,321.95, the lowest level since January 2011.