LONDON (AP) — Disappointing earnings from two U.S. technology giants and renewed concerns over the growth prospects for China and Japan weighed on markets Friday despite better U.S. economic news.
Stocks in Asia and Europe retreated even though Wall Street struck record levels again on Thursday after some encouraging U.S. economic data. Stocks around the world have had a generally solid week especially after U.S. Federal Reserve Chairman Ben Bernanke indicated that the scale and scope of the central bank's monetary stimulus may remain in place for longer than many in the markets had been predicting.
"The big question for investors is whether the improving U.S. economic position justifies current market levels or whether, as we've seen from last night's technology earnings, the current levels are overly optimistic," said Rebecca O'Keeffe, Head of Investment at Interactive Investor.
Specifically, she was referring to the less-than-impressive earnings reports from Microsoft and Google that were released after the close of U.S. trading Thursday. Google's quarterly report showed its average ad rate fell from the previous year for the seventh consecutive quarter. In an unexpected turn, the decline deepened for the first time in a year.
Software giant Microsoft booked a large write-off to its Surface RT business after it slashed prices on the tablets to stimulate demand this week. Its quarterly earnings results also showed that Windows 8, an operating system designed to bridge the divide between PCs and tablets, has been so poorly received that it contributed to a revenue drop in its operating system software unit.
In Europe, the FTSE 100 index of British shares was 0.3 percent lower at 6,614, while Germany's DAX fell 0.2 percent to 8,313. The CAC-40 in France was down 0.2 percent at 3,919.
Wall Street was poised for a disappointing open with both Dow futures and the broader S&P 500 futures down 0.2 percent.
Stock markets, particularly in the U.S., have had a bumper month following a bout of jitters prompted by uncertainty over when the Fed will start reducing its monetary stimulus.
The Fed has been buying $85 billion of financial assets a month in the hope of reducing long-term borrowing rates and shore up the U.S. economy. Bernanke has said that the so-called tapering will begin when a number of economic indicators point to a clear recovery path. The prospect that it may remain for longer has been greeted positively by investors who have grown used to the stimulus money floating around markets.
"Despite the weakness in stocks this morning, global equities are still on track to post a fourth week of gains, helping to underpin the generally bullish feeling in the market of late," said David White, a trader at Spreadex.
Earlier in Asia, markets closed mostly lower following the tech reports in the U.S. and amid worries over the Chinese and Japanese economies, the world's number 2 and 3.
China this week reported its second straight quarter of slower growth and authorities appear determined to stick to a path of shifting the economy away from reliance on investment and exports, which could dent economic activity in the near term.
In Japan, the initial euphoria over the "Abenomics" stimulus policies of Prime Minister Shinzo Abe has faded and doubts have emerged about whether deeper reforms will be carried out. Japan holds upper house elections this weekend.
Japan's Nikkei 225 shed 1.5 percent to 14,589.91 while Hong Kong's Hang Seng added just 0.1 percent to 21,362.42. Seoul's Kospi wavered between gains and losses, finishing 0.2 percent down at 1,871.41. China's Shanghai Composite index fell 1.5 percent to 1,992.65.
The mood was fairly steady in other financial markets.
In currency markets, the euro was flat at $1.3103 while the dollar was stable at 100.45 yen.
In oil markets, the price of benchmark New York crude was 14 cents lower at $107.90 a barrel.
Cerojano contributed from Manila, Philippines.