Global markets: Google, IBM cast shadow

Written by Reuters | London | Updated: Apr 17 2014, 21:30pm hrs
GoogleThe dollar eased to 101.97 yen from an early high at 102.26. The euro was firmer at $1.3838, but well within recent ranges. (Reuters)
European stocks dipped on Thursday as disappointing earnings from U.S. tech heavyweights Google and IBM dampened the previous session's upbeat tone on Wall Street, and the dollar weakened on dovish remarks from the Federal Reserve.

Google Inc fell as much as 6 percent after first-quarter revenue fell short of Wall Street targets and margins narrowed as its ads prices decline persisted.

Shares in IBM Corp fell as much as 4 percent after the world's largest technology services company reported its lowest quarterly revenue for five years as it struggles with falling demand for storage and server products.

European stocks fell 0.14 percent, with upcoming Easter holidays, profit warnings from French spirits maker Remy Cointreau and German business software maker SAP and tensions over Ukraine also weighing.

Wall Street had ended Wednesday with more vigour. Both the Dow and S&P 500 gained about 1 percent, while the Nasdaq bounced by 1.29 percent.

Economic news out of the United States was mixed, with industrial production beating forecasts but housing starts disappointing.

Still, investors were cheered by the Fed's Beige Book of anecdotal information on business activity which showed activity picked up in recent weeks as weather-related drag eased.

The dollar and U.S. Treasury yields fell after Fed Chair Janet Yellen on Wednesday said it might take two years to return to full employment and there was more risk of inflation staying too low than going too high.

Achieving the Fed's economic goals "will likely require low real interest rates for some time", a policy view she said was shared broadly across many advanced economies.

"Yellen's comments have hurt the dollar as she has indicated that the Fed is in no hurry to raise rates," Societe Generale currency strategist Alvin Tan said.

"With U.S. yields at the bottom of its recent range, we expect the dollar to remain soft. Only when yields pick up and the market focuses on rate hikes by the Fed will the dollar start to rally. That we expect some time in the third quarter of this year."

Yields on Treasury 30-year bonds dipped to their lowest since June at 3.44 percent before pulling back to 3.456 percent. German Bund futures rose 4 ticks to 144.40.

The dollar eased to 101.97 yen from an early high at 102.26. The euro was firmer at $1.3838, but well within recent ranges.

Bonds in peripheral Europe extended their spectacular rally amid speculation that persistently low inflation would force the European Central Bank to launch further stimulus.

Yields on Spanish 10-year debt sank to their lowest in over eight years at 3.044 percent, while Italian 10-year yields hit an all-time trough at 3.07 percent.

The yield on the first bond Greece sold after its 2012 default dipped just below its issuance levels, as Athens rejoined the ECB-driven rally in peripheral debt markets following a brief period of selling pressure.

"The rally in peripheral bond markets continued unabated this week and I don't see why Greece should go against the tide," KBC strategist Mathias van der Jeugt said.

Tension remained over the situation in Ukraine where the interior minister said on Thursday that three pro-Russian separatists were killed in shooting that broke out overnight in the town of Mariupol on the Sea of Azov.

Ukrainian, Russian and Western diplomats arrived for emergency talks in Switzerland, but there was little hope of any progress in resolving a crisis that has seen armed pro-Russian fighters seize whole swathes of Ukraine.

Spot gold steadied at $1,300 an ounce, having found support around $1,290/1,293 after this week's technical selloff.

Brent crude for June edged up 1 cent to $109.62 a barrel and U.S. crude 34 cents at $104.10, with tensions over Ukraine heightening concerns over Russian supplies.