European markets trade lower as mixed earnings fuel profit-taking

European markets down after mixed earnings

LONDON — European stock markets fell Tuesday ahead of an expected lower opening in the U.S. as downbeat news from the financial sector led investors to book profits from recent market highs.

The FTSE 100 index of leading British shares, which closed Monday at its highest level since last October, was down 49.84 points, or 1.1 percent, at 4,632.62. Germany’s DAX fell 52.79 points, or 1 percent, to 5,374.06 while the CAC-40 in France was 21.56 points, or 0.6 percent, lower at 3,456.24.

Wall Street was poised to open lower too. Dow futures were down 47 points, or 0.5 percent, at 9,201 while the broader Standard & Poor’s 500 futures fell 6.2 points, or 0.6 percent, to 994.50. The S&P closed Monday above the 1,000 mark for the first time since last November.

Financial earnings, which helped foster gains on Monday, did little to alter the underlying mood to book profits.

In London, Standard Chartered Bank PLC fell 7 percent following its surprise announcement that it is planning to issue $1.7 billion of new shares, while insure Legal & General PLC slid 5 percent after cutting its dividend by 45 percent.

Meanwhile in Switzerland, UBS AG reversed early gains and saw its share price drop over 5 percent as investors booked profits accumulated in the wake of last week’s news that the Swiss and U.S. governments had reached an agreement over the Internal Revenue Service’s search for U.S. tax evaders. The bank’s third straight quarterly loss did little to encourage any further buying.

Elsewhere, luxury automaker BMW AG saw its share price fall nearly 5 percent after it reported a 76 percent fall in second-quarter profit and opted not to provide a forecast for the rest of the year, citing “the highly volatile state of the markets and uncertainty with regard to future developments.”

And German consumer goods company Beiersdorf AG Tuesday said its second quarter net profit fell 41 percent amid falling consumer spending brought on by the global recession — sending its shares down 2 percent.

Investors also remained cautious though ahead of some key economic events this week, including interest rate decisions from the Bank of England and the European Central Bank. Because both banks are set to keep their benchmark rates unchanged at 0.5 percent and 1 percent respectively, more interest will be on what the two say about alternative measures to boost the quantity of money in their respective economies.

While the European Central Bank is unlikely to change course and pursue a more aggressive strategy, the Bank of England may well decide that it has already pumped more than enough money into the economy — for now at least.

Most interest in the markets this week will be on Friday’s U.S. jobs report for July, which often sets the tone in the markets for a few weeks.

“For many it’s now going to be a case of playing the waiting game ahead of the non-farm payrolls on Friday before deciding where to take equities,” said Anthony Grech, market analyst at IG Index.

Earlier in Asia, Japan’s benchmark Nikkei 225 index rose 22.54, or 0.2 percent, to a 10-month high of 10,375.01 amid a smaller-than-expected quarterly loss from Toyota, the world’s top automaker. Hong Kong’s Hang Seng index slipped 10.83, or 0.1 percent, to 20,796.43 in back and forth trade while South Korea’s Kospi rose 0.1 percent to 1,566.37.

China’s Shanghai Composite Index, which initially fell after regulators announced a review of bank capital adequacy as they try to cool a credit boom, closed up 8.85 points, or 0.3 percent, at 3,471.44.

Elsewhere, Australia’s benchmark rose 1.1 percent while Singapore’s market measure dropped 0.9 percent and Taiwan’s Taiex fell 1.4 percent.

Oil prices stayed above $70 despite falling in line with stocks. Benchmark crude for September delivery fell $1.28 to $70.30 per barrel in electronic trading on the New York Mercantile Exchange.

The dollar fell 0.6 percent to 94.70 yen while the euro dropped 0.2 percent to $1.4383, having earlier hit an eight-month high of $1.4433 in the wake of the strong manufacturing news.

In recent weeks the dollar and stocks have moved in opposite directions. As investors grow more willing to take on risk, stocks have rallied and the dollar has dropped against the euro. Conversely, when shares have fallen, the dollar has tended to rise as it is widely considered a safe haven asset despite all the problems afflicting the U.S. economy.

“Stock markets will continue to lend direction,” said Jane Foley, research director at Forex.com.

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