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GLOBAL MARKETS-Poor earnings knock stocks, dollar bounces

Published 10/22/2009, 07:46 AM
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* Disappointing earnings weaken stocks

* Europe down 1.4 percent, Japan 0.6 percent

* Wall Street set for weak start

* Dollar bounces off 14-month lows

* Euro zone government bonds flat

By Jeremy Gaunt, European Investment Correspondent

LONDON, Oct 22 (Reuters) - Disappointing corporate results knocked equities lower on Thursday, set Wall Street up for a poor start and helped the dollar bounce off 14-month lows.

Gold and oil both slipped as the dollar rose. Euro zone government debt was stronger.

Investors in Europe and Asia picked up on Wednesday's weakness on Wall Street where there was a late sell-off of banking shares and where a wider-than-expected loss from Boeing had hurt overall sentiment.

After the bell, eBay Inc , the global e-commerce site, forecast fourth-quarter profit and revenue at the low end of analysts' estimates.

The sour mood was compounded in Europe on Thursday when Ericsson posted lower-than-expected third-quarter core earnings and said sales in its key mobile networks market were hampered by tough market conditions.

World stocks as measured by MSCI <.MIWD00000PUS> were down 0.7 percent with the emerging market component off around 1 percent <.MSCIEF>.

Europe's FTSEurofirst 300 <.FTEU3> lost 1.3 percent. Earlier Japan's Nikkei <.N225> closed down 0.6 percent.

Earnings results have generally been better than expected so far in this reporting season, particularly in the United States, but shares are also around year highs, making them susceptible to a fall if something disappoints.

"The market was poised for a retreat, but I'm not expecting a major correction," said Christian Jimenez, president of Imene Investment partners, in Paris. "At these levels, if all companies would report satisfying results, that would justify further gains on the market."

DOLLAR BOUNCE

The dollar rose broadly, pulling back from a 14-month low against the euro and a currency basket as global stocks fell.

The currency has been trading in inverse correlation to equities in recent months, based on shifting risk appetite among investors.

Analysts said the dollar was still on a downward trend because of generally positive earnings and the view that U.S. interest rates will remain low.

"The euro's proximity to $1.50 suggests that the market is not taking the current correction as too serious," said Michael Klawitter, senior currency strategist at Commerzbank in Frankfurt.

The euro was down 0.1 percent at $1.4977 after breaking the $1.50 level on Wednesday. The dollar was up half a percent against a basket of major currencies <.DXY>.

Euro zone government bonds were little changed.

Longer-dated paper remained close to near four-week lows hit on Wednesday as the penultimate Federal Reserve purchase of U.S. Treasuries reminded markets that support for government bond markets from central bank buying may be nearing an end. (Additional reporting by Blaise Robinson and Naomi Tajitsu, editing by Mike Peacock) (To read Reuters Global Investing Blog click on http://blogs.reuters.com/globalinvesting; for the MacroScope Blog click on http://blogs.reuters.com/macroscope)

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