World stocks steady above 11-month lows
Updated: 2011-08-22 21:16
The index screen is seen at the Warsaw Stock Exchange August 22, 2011. [Photo/Agencies]
LONDON - World stocks held above a recent 11-month low on Monday while oil prices slipped as investors concerned about a global economic downturn stayed away from buying risky assets.
In Europe, shares bounced back as hopes of an end to the conflict in Libya pushed energy shares higher and a recent sharp selloff encouraged investors back into the market.
European stocks were up 1.3 percent, as a 1 percent rise in US stock futures indicated Wall Street would open higher.
Investors, however, were in no mood to aggressively buy risky assets. Persistent worries that the sovereign debt crisis in euro zone peripheral countries may spread to bigger economies in the region continued to encourage safe-haven flows into gold, pushing it to another record high.
The benchmark MSCI index of world stocks has now fallen for five weeks in a row and looks to be heading for its worst monthly performance since October 2008, when markets were reeling after the collapse of Lehman Brothers.
"I am sure that there are some bargain hunters active in the market. Equities might gain some momentum as the week progresses," said Mike Lenhoff, chief strategist at Brewin Dolphin.
"But if the market has to sustain the rebound, it has to have some cyclical sectors such as banks and mining behind it. Defensives tend to steady the markets, but I am not sure that they help to lead to a sustainable path for a rebound."
The MSCI world equity index fell 0.7 percent at one point before erasing most losses.
Beyond the short-term bounce, the equity market faces headwinds from the weakening outlook for earnings, especially in Europe.
According to Thomson Reuters data, analysts made more cuts than upgrades to their profit forecasts in the last month, pushing the earnings momentum for the STOXX Europe 600 companies to -11.88 percent from -6.8 percent a month ago.
US Brent crude oil fell 1.3 percent. On top of a weak economic outlook, the potential for a restart of Libyan oil flows into the market if the Gaddafi regime collapses also weighed on prices.
Bund futures fell 35 ticks.
Gold hit a third consecutive all-time high near $1,900 an ounce, after staging its biggest weekly gain in 2-1/2 years last week.
The euro rose 0.3 percent. The dollar held above a record low around 75.94 yen hit on Friday, thanks to concerns about intervention by Japanese authorities.
The US currency fell 0.1 percent against a basket of major currencies.
Investors are waiting to see whether the Federal Reserve flags further stimulus when bankers gather in Jackson Hole, Wyoming, late this week, a year after Chairman Ben Bernanke launched a second round of quantitative easing to revive the economy.
Additional bond purchases by the Fed could help reflate asset prices, but many view the chances of a third round of quantitative easing as limited and expect the Fed to take gradual measures to boost the economy.