World markets down as JP Morgan sales disappoint; euro hit hard by Merkel resignation rumor

World markets hit by JP Morgan sales disappoint

LONDON — World stock markets fell Friday after lower than expected revenues at JP Morgan Chase & Co. and a soft U.S. consumer confidence report.

The euro sagged on fears over Greece’s debt crisis and rumors about political trouble in Germany.

In Europe, the FTSE 100 index of leading British shares closed down 42.83 points, or 0.8 percent, at 5,455.37, while France’s CAC-40 index fell 61.39 points, or 1.5 percent, to 3,954.38.

Germany’s DAX underperformed its European counterparts as a rumor swirled in the markets that German Chancellor Angela Merkel was about to resign, which she and the government dismissed as untrue. The DAX ended 112.91 points, or 1.9 percent, lower at 5,875.97. The euro was also down sharply on the back of the Merkel rumor.

On Wall Street, the Dow Jones industrial average was down 97.27 points, or 0.9 percent, at 10,613.28 around midday New York time while the broader Standard & Poor’s 500 index fell 11.66 points, or 1 percent, to 1,136.80.

The euro fell 0.9 percent to $1.4375 while the dollar was down 0.4 percent at 90.83 yen. The euro had been in retreat since the Asian session when the rumor about Merkel first began.

“The fact that the euro could be hit so hard in Asian hours by a rumor that recently re-elected German Chancellor Merkel could be about to resign is a reflection of the euro’s vulnerability at present,” said Jane Foley, research director at Forex.com.

The euro has been weighed down in recent weeks by the mounting concerns over Greece’s debt situation. The country’s deficit has soared beyond agreed limits intended to support the shared currency, leading to speculation Greece may need an expensive bailout.

The retreat on Wall Street came despite a near tenfold increase in Intel’s fourth quarter earnings and a rise in JP Morgan’s net profit to $3.3 billion from $702 million in the same period last year.

However, JP Morgan sales were $1 billion lower than anticipated at $25.2 billion as the bank’s retail arm experienced tough times — many investors are more interested to see if companies are managing lift sales during the economic recovery rather than driving up profits by ongoing cost-cutting measures.

Further selling was generated by a worse than expected consumer survey from the University of Michigan.

“All of this seems to have convinced investors that there is no hurry to buy in ahead of the holiday weekend for U.S. markets,” said David Jones, chief market strategist at IG Index, referring to Monday’s Martin Luther King holiday.

Once Wall Street returns on Tuesday, all eyes will be on further U.S. earnings due. JP Morgan is followed by many of the other U.S. banks next week and that could be key for stock markets.

Steven Ricchiuto, an analyst at Mizuho Securities, said the consensus in the markets is only for fairly modest increase in earnings for the market as a whole during the fourth quarter and that this “conservative” expectation could help the stock rally resume.

“As such, the more bullish equity strategists are targeting the 1,250-1,300 level for the broad market index (S&P), or a complete reversal of the post Lehman Brothers collapse in stocks,” he said.

Earlier in Asia, Japan’s Nikkei 225 stock average advanced 74.42 points, or 0.7 percent, to 10,982.10 while Hong Kong’s Hang Seng slipped 62.79, or 0.3 percent, to 21,654.16 amid news that Beijing has dropped a plan to let mainland Chinese buy shares listed in the territory.

South Korea’s Kospi advanced 1 percent to 1,701.80 and Taiwan’s benchmark added 0.8 percent. Elsewhere, Australia’s market was marginally higher and Indonesia’s benchmark was up 0.3 percent.

Oil prices fell amid weak crude demand from developed countries. Benchmark crude for February delivery was down 80 cents at $78.59 a barrel in electronic trading on the New York Mercantile Exchange. On Thursday, the contract fell 26 cents to settle at $79.39.