LONDON (AP) — Renewed fears about the pace of the U.S. economic recovery hit stocks Friday, September 17, after a survey showed consumer sentiment fell to its lowest level in over a year.
The University of Michigan reported that its main consumer sentiment index slipped to 66.6 in September from August’s 68.9. The drop was unexpected — the consensus in the markets was that the index would rise modestly to 70. The long-run average is around 85
The data provided further evidence that the U.S. consumer is faltering amid mounting talk of a double-dip recession, especially as consumer spending accounts for around 70 percent of the world’s largest economy.
“The broader story is that the slow bleed in consumer sentiment appears to be continuing, probably because of an array of reports that this recovery is not generating nearly the same number of jobs as past recoveries,” said Alan Ruskin, an analyst at Deutsche Bank.
“Going into the weekend it looks like traders are willing to simply chop risk,” said Ruskin.
The impact in the markets was to turn modest gains into modest losses.
In Europe, the FTSE 100 index of leading British shares closed down 0.4 percent at 5,508.45 while Germany’s DAX fell 0.6 percent to 6,209.76. The CAC-40 in France was 0.3 percent lower at 3,722.02.
In the U.S., the Dow Jones industrial average was down 0.1 percent at 10,586.21 while the broader Standard & Poor’s 500 index was 0.1 percent higher at 1,126.07.
The figures were a disappointment for investors who had earlier marked up shares after positive earnings news from technology companies such as Oracle and BlackBerry maker Research in Motion helped shore up sentiment.
The technology sector is widely seen as a bellwether of the recovery, as companies’ and households’ demand rises as the economic outlook brightens.
Over the past week or so, stocks have rebounded as fears of a return to recession in the U.S. — the so-called ‘double-dip’ — have diminished after a run of solid economic data. However, the prevailing view is that the recovery will continue to be fairly subdued, possibly requiring further support from policymakers, both in government and at the U.S. Federal Reserve.
Figures showing that U.S. consumer prices rose 0.3 percent in August — roughly in line with expectations — had little impact on the markets on a day when trading was somewhat volatile, given that many futures and options contracts have to be settled in both Europe and the U.S.
The U.S. inflation data are unlikely to convince the Fed of the need to boost money supply by buying bonds from financial institutions.
“Today’s inflation report indicates that the Fed’s monetary policy is unlikely to change in the foreseeable future due to the absence of inflationary or deflationary pressures,” said Michael Woolfolk, an analyst at Bank of New York Mellon.
Earlier in Asia, Japan’s benchmark Nikkei 225 stock average gained 116.59 points, or 1.2 percent, to 9,626.09 as exporters continued to move higher in the wake of the Bank of Japan’s decision earlier this week to intervene directly in the currency markets to stem the export-sapping appreciation of the yen.
By mid afternoon London time, the dollar was down 0.1 percent at 85.74 yen, way up from the 82.87 yen 15-year low it was trading at before the intervention.
One side-effect of the intervention over the last couple of days has been a strengthening in the euro against the dollar. The euro was down 0.1 percent at $1.3046, having earlier hit a five week high of $1.3159.
Analysts said that Japan’s defense of its currency, its first intervention in six years, has made the euro a favorite bet with traders against the dollar.
Elsewhere in Asia, South Korea’s Kospi rose 0.9 percent to 1,827.35, Hong Kong’s Hang Seng added 1.3 percent to 21,970.86 and Australia’s S&P/ASX 200 advanced 0.7 percent to 4,638.90.
Benchmark crude for October delivery was down 76 cents at $73.81 a barrel in electronic trading on the New York Mercantile Exchange. The contract lost $1.45 to settle at $74.57 a barrel on Thursday, September 16.
Associated Press Writer Alex Kennedy in Singapore contributed to this report.
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