Bruised stocks sag before U.S. earnings start
By Marc Jones
LONDON (Reuters) - A three-day sell-off in world stocks slowed on Tuesday as investors settled into position for the start of U.S. earnings season and gains in China added to signs of revived emerging-market demand.
European shares and bonds were both dragged down by ongoing caution, amid renewed tension in Ukraine and signs the European Central Bank may not be as eager to begin large-scale stimulus as had been hoped.
After some early resistance, the region's main bourses buckled, leaving London .FTSE, Paris .FCHI and Frankfurt .GDAXI 1 percent lower and recent top performing Spanish .IBEX and Portuguese .PSI20 indexes down more than 2 percent.
Euro zone bond yields, a proxy for government borrowing costs, rose <GVD/EUR>. The euro strengthened to its highest in a almost a week.
"The QE (quantitative easing) talk continues to be very much in focus in Europe," said Jan von Gerich, the chief developed markets strategist at Nordea in Helsinki. "The ECB is clearly tempering the expectations, and I think the Ukraine news is also contributing to the weakness."
Earlier, Asian stocks had managed to shrug off the gloom of a third day of sizable losses on Wall Street. Chinese shares .CSI300, particularly those of banks, rose on stimulus hopes and helped to take MSCI's benchmark emerging market index .MSCIEF to its highest since mid-December.
Emerging markets have rebounded sharply in the past two weeks. Investors appeared to have largely put aside the worries about geopolitics, slowing U.S. stimulus and China's stuttering economy that had fuelled a turbulent start to the year.
But Japan's Nikkei .N225 fell 1.4 percent on concern over a decline by global tech stocks. The yen also rose as the Bank of Japan kept its policy steady on Tuesday and offered little to suggest more stimulus was likely in the near term. Continued...