(Updates prices, adds U.S. CPI data)
By Ian Chua
LONDON, Jan 16 (Reuters) - Fears of a U.S. recession
following weak U.S. data and corporate news kept a stranglehold
on global markets on Wednesday, hammering stocks and the dollar,
but giving safe-haven government bonds a fillip.
Losses looked set to deepen on Wall Street after JPMorgan
Chase & Co <JPM.N> posted a worse-than-expected 24 percent fall
in quarterly profit and a day after disappointing results and
outlook from technology bellwether Intel Corp. <INTC.O>.
The closely watched U.S. consumer price inflation data,
which was mostly in line with expectations, did little to shake
expectations for more U.S. rate cuts. December core CPI rose 0.2
percent as expected, while the headline figure climbed 0.3
percent, slightly ahead of a forecast 0.2 percent rise.
"This report should not change expectations of a 50 basis
points rate cut," said David Watt, senior currency strategist at
RBC Capital Markets in Toronto.
Indeed, with expectations of hefty rate cuts from the
Federal Reserve running high, the dollar sank to a record low of
about 1.0839 Swiss franc <CHF=> and a 2-1/2 year trough of
105.93 yen <JPY=>. The euro was little changed near $1.48
<EUR=>, pausing after a recent string of gains.
MSCI's key world equity index <.MIWD00000PUS> shed 1.4
percent to levels last seen in mid-August, while the
FTSEurofirst 300 <> index of top European shares fell more
than 1 percent to trade near its lowest since September 2006.
Adding to worries was news that Britain's housing market may
already be lurching from boom to bust and a survey suggesting
France was no exception to a region-wide growth slowdown at the
end of 2007. []
"There is a lot of nervousness about the general outlook for
global macro and that has disturbed the stock market picture,"
said Johan Javeus, FX strategist at SEB Merchant Banking.
"Stock markets seem to be almost pricing in a recession
scenario for the U.S., and it's also on most economists' radars
even if they haven't taken it into their forecasts yet."
Earlier, Japan's Nikkei <> ended at a fresh two-year
low, closing down 3.4 percent at 13,504.51, while MSCI's measure
of other Asian stock markets <.MIAPJ0000PUS> slid nearly 4
percent.
Commodity prices also took a hit with U.S. crude <CLc1>
sliding below $91 a barrel to four-week lows, while copper
prices plumbed 1-week lows on fears the bleak global outlook
will crimp demand.
BONDS FIRM
Weakness in equities helped boost demand for safe-haven
government bonds, driving yields lower. Among euro zone bonds,
the 10-year Bund yield <EU10YT=RR> fell below 4 percent for the
first time since March 2007.
The benchmark 10-year yield for U.S. Treasuries <US10YT=RR>
fell to 3.67 percent, but was off a low of about 3.62 percent --
the lowest since mid-2003 -- in the wake of the CPI data.
"We think Treasuries might still rally if ever we see a 50
basis point intermeeting rate cut," said Societe Generale fixed
income strategists in a note.
Interest rate futures <FEDWATCH> expect an almost 50-50
chance of a 75 basis points cut this month in U.S. benchmark
interest rates, from 4.25 percent.
Gold <XAU=>, usually seen as a safe-haven play, fell victim
to profit-taking after failing to break the record high of $914
an ounce set on Monday.
Spot gold was trading around $888 an ounce, although further
downside was seen limited by a struggling dollar and buying from
jewellers.
