European stocks flat ahead of US GDP data

By Louise Watt, The Associated Press

LONDON - European stock markets traded flat on Thursday as investors awaited quarterly growth data from the U.S. later in the day for insight into the state of the world's biggest economy.

In morning trading in Europe, Britain's FTSE 100 slipped a minuscule 0.02 per cent to 5,079.46, Germany's DAX rose 0.05 to 5,498.91, and France's CAC 40 lost 0.03 per cent to 3,662.72.

Asian stock markets fell for a third day after signs of weakness in the U.S. housing market added to fears about the health of the global economic recovery.

In Europe, financials were higher while some oil stocks suffered after Royal Dutch Shell PLC reported a drop in third-quarter profit.

Meanwhile, investors were waiting for the U.S. government to report third-quarter gross domestic product data at 1230 GMT (8:30 a.m. EDT). Economists are looking for growth at an annual rate of 3.3 per cent after a record four straight quarters of contraction. However, on Wednesday Goldman Sachs Group Inc. cut its forecast of U.S. economic output in the July-September quarter from an annual rate of 3 per cent to 2.7 per cent.

Wall Street was expected to open higher. Dow Jones industrial average futures rose 0.4 per cent to 9,750 and Standard & Poor's 500 futures added 0.5 per cent to 1,043.30.

Oil company Shell reported a 62 per cent fall in third-quarter profit to $3.25 billion (euro2.21 billion), as weakness in the global economy pushed down oil prices and refining margins. Shares were down 3.6 per cent in London after Chief Executive Peter Voser said the outlook remained uncertain.

France's Total slipped 1.3 per cent, while Shell's largest competitor in Europe, BP, which reported better-than-expected earnings earlier this week, gained 0.3 per cent.

"Today's update (from Shell) could prompt some tactical switching of holdings," said Richard Hunter, of Hargreaves Lansdown Stockbrokers.

In Asia, Hong Kong, Shanghai, Sydney and Taiwan all declined 2 per cent or more after Wednesday's U.S. government report showed new home sales fell unexpectedly in September for the first time since March. That fueled fears the housing rebound was driven solely by government policies that are being withdrawn before the private sector recovers.

"This really increased nervousness about the health of the global recovery and market valuations," said Dariusz Kowalczyk, chief investment strategist for SJS Markets in Hong Kong.

Markets got little reassurance from an International Monetary Fund report that raised Asian growth forecasts for this year and next.

Tokyo's Nikkei 225 index dropped 1.8 per cent to 9,891.10 while China's benchmark Shanghai Composite Index shed 2.3 per cent to 2,960.47.

Taiwan's Taiex and Sydney's S&P/ASX 200 suffered the region's biggest declines, both falling 2.4 per cent. Hong Kong's Hang Seng was down 2.3 per cent at 21,264.99.

Adding to investor nervousness was Norway's decision Wednesday to become the first European country to raise interest rates since the crisis began, Kowalczyk said. He said that prompted worries governments might be withdrawing stimulus measures before private sector activity has fully recovered.

"Concerns are that if this support wanes or is withdrawn and the private sector is unable to replace government monetary actions, there could be another economic slump," Kowalczyk said.

Elsewhere in Asia, South Korea's Kospi fell 1.5 per cent and Singapore's Straits Times Index dropped 0.7 per cent.

Wall Street was hit Wednesday by a government report that showed September sales of new homes falling by a 3.6 per cent seasonally adjusted annual rate of 402,000. Economists had expected 440,000.

The Dow fell 1.2 per cent to 9,762.69. The index is down in five of the past seven days.

The Standard & Poor's 500 index slid 2 per cent to 1,042.63.

Oil prices hung below $78 a barrel in Europe as an unexpected jump in U.S. gasoline supplies cast doubt on the strength of a recovery in crude demand. Benchmark crude for December delivery was up 23 cents to $77.69 a barrel in electronic trading on the New York Mercantile Exchange. The contract fell $2.09 to settle at $77.46 on Wednesday.

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AP Business Writer Joe McDonald in Beijing contributed to this report.