Weak U.S. economic data pushes stocks lower

By Pan Pylas

Associated Press

Published: Thursday, May 26 2011 9:56 a.m. MDT

LONDON — Weak U.S. economic data weighed on stocks Thursday, though worries over Greece's debt crisis eased somewhat following indications that the country may get more help.

European markets and Wall Street futures had been generally higher until the U.S. Commerce Department reported that U.S. economic growth in the first quarter was an annualized 1.8 percent, unchanged from the previous estimate but below market expectations for 2 percent.

There was further disappointment with the news that U.S. weekly jobless claims rose 10,000 to 424,000. The first increase in three weeks was unexpected and provided more evidence that the world's largest economy is generating fewer jobs than would have been hoped at this stage in the recovery.

"The latest U.S. data definitely fit into a growing pattern of softer than expected reports," said Alan Ruskin, an analyst at Deutsche Bank.

Stock have been weighed down by concerns about the pace of the U.S. recovery as well as worries over Europe's debt crisis, in particular whether Greece will end up having to restructure its mountain of debts.

Some of those worries were eased Thursday by comments from Germany's finance minister Wolfgang Schaeuble that Greece may need more time to get its house in order — an indication the country will get the next tranche of its rescue loans and possibly a second bailout.

"Those comments suggest greater consensus toward a fresh loan to keep Greece funded through to 2013," said Derek Halpenny, an analyst at The Bank of Tokyo-Mitsibushi UFJ.

Halpenny said the markets will be looking at the summit of G-8 leaders in Deauville, France for any further comments, if any.

The euro has dropped over the past couple of weeks as debt crisis fears ratcheted higher. However, it garnered some support Thursday from a report in the Financial Times that China, among others in Asia, is interested in buying up bonds from Portugal, the eurozone's third bailout victim.

By mid afternoon London time, the euro was 0.3 percent higher on the day at $1.4129.

Stocks in Europe were faring less well, with Germany's DAX down 0.9 percent to 7,105. The CAC-40 in France was 0.4 percent lower at 3,912 while the FTSE 100 index of leading British shares bucked the trend, trading 0.2 percent higher at 5,882.

In the U.S., the Dow Jones industrial average was down 0.5 percent at 12,334 an hour into the session while the broader Standard & Poor's 500 index fell 0.3 percent to 1,317.

Earlier in Asia, stocks enjoyed a strong day, with Japan's Nikkei 225 stock average boosted by the news that camera maker Canon was to spend as much as 50 billion yen ($183 million) buying back up to 1.2 percent of its shares.

The Nikkei closed 1.5 percent higher at 9,562.05, with Canon up 5.8 percent.

South Korea's Kospi leaped 2.8 percent to end at 2,091.91 while Australia's S&P/ASX 200 rose 1.6 percent to finish at 4,660.20.

Hong Kong's Hang Seng ended 0.7 percent higher at 22,900.79 but mainland Chinese shares slid amid concerns that growth may slow in the latter half of the year. Shanghai's Composite Index dipped 0.2 percent to close at 2,736.53 while the smaller Shenzhen Composite Index lost 1 percent to end at 1,123.15.

Meanwhile, oil prices continued to hover round the $100 a barrel mark. Benchmark crude for July delivery was down 73 cents to $100.59 in electronic trading on the New York Mercantile Exchange on Thursday.

"Expectations are for the figure to be upwardly revised, which would certainly help to quell some of the negative sentiment that has been dogging the markets this week," said Ben Critchley, sales trader at IG Index.

If the growth data disappoint, then it may reinforce concerns about the U.S. economic recovery.

Kelvin Chan in Hong Kong contributed to this report.

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