NEW YORK World stock markets fell modestly on Wednesday while prices of safe-haven German bonds and U.S. Treasuries rose as weak economic data from Europe raised concerns about the health of the global economy.
Financial shares in the United States rallied on strong corporate results from Goldman Sachs (GS.N), helping to limit some of the broader market losses, which came as the World Bank sharply cut its outlook for world growth.
The view for 2013 growth was reduced to 2.4 percent from 3 percent. The World Bank said a slow recovery in developed nations was holding back the global economy.
The Dow Jones industrial average was down 19.33 points, or 0.14 percent, at 13,515.56. The Standard & Poor's 500 Index was up 0.54 points, or 0.04 percent, at 1,472.88. The Nasdaq Composite Index was up 7.90 points, or 0.25 percent, at 3,118.67.
Losses in U.S. equities were offset by financial shares. Goldman Sachs rose 2.4 percent to $138.82 after it reported fourth-quarter earnings that nearly tripled, while revenue surged on dealmaking. Peer financial services firm Morgan Stanley (MS.N) rose 0.5 percent at $20.53.
JPMorgan Chase & Co (JPM.N) also reported sharp increases in earnings, but its stock fell 1.6 percent to $45.60.
"Both companies had terrific results, and so far it looks like banks are justifying the run-up they've had over the past few months," said Wayne Kaufman, chief market analyst at John Thomas Financial in New York. "But for the economy as a whole, we're only seeing slow improvement that is not nearly as fast as we'd like to see."
The MSCI world equity index fell 0.3 percent while Europe's FTSE Eurofirst 300 index was up slightly following a series of losses. Japan's benchmark Nikkei stock average shed 2.6 percent for its largest daily fall in eight months.
Along with the weak World Bank outlook, industry figures showed European new car sales plunged in 2012 to the lowest level since 1995, with all major euro zone markets suffering, whereas Britain and Sweden recorded growth. This came a day after Germany reported its economy shrank at the fastest pace in almost three years in the final quarter of 2012.
"Following the German growth numbers yesterday there is simply a realization the recession in the euro zone in the fourth quarter will be much bigger than the previous consensus," said Daiwa Securities economist Tobias Blattner.
However, the euro recovered some of its losses against the dollar after a European Central Bank policymaker eased fears that officials might undermine the currency's recent strength.
The euro was trading just below $1.33 at around $1.3290, having made up some of the ground lost when the outgoing head of Eurogroup, Jean-Claude Juncker, said the currency was "dangerously high.
The turnaround came when ECB policymaker Ewald Nowotny said the exchange rate was "not a matter of major concern," reassuring investors that the central bank would not target a weaker exchange rate to help the region's struggling economies.
U.S. consumer prices were flat in December, pointing to muted inflation pressures that should help give the Federal Reserve room to prop up the economy by staying on its ultra-easy monetary policy path. Equity markets were unmoved by the data.
In bond markets, Germany drew healthy demand for its debt at an auction of new 10-year bonds.
"Uncertainties about the economic outlook and political risks continue to loom and today's auction results are a sign that market dealers still see some value in core (European) debt," said Annalisa Piazza, market economist at Newedge.
Ten-year German bond yields in the secondary market rose to put yields at 1.489 percent.
U.S. Treasury prices, meanwhile, extended their recent gains on concerns about the federal government's debt limit. The benchmark 10-year U.S. Treasury note was up 2/32, the yield at 1.829 percent.
Assets traditionally viewed as offering protection against risk have been boosted this week as political wrangling has begun again over raising the U.S. government's self-imposed debt limit, which is expected to be reached before March.
Gold was up 0.6 percent to $1,676.60 an ounce for a third straight session of gains, supported by expectations that the world's leading central banks will continue their ultra-loose monetary policies.
Worries over supply pushed platinum prices up to $1,689.50 to mark a seventh straight session of gains, the longest upward streak since early October.
Workers for top producer Anglo American Platinum downed tools on Wednesday in protest at an announcement from the firm, known as Amplats, that it would close mines and cut jobs.
Cold weather in Europe and the United States underpinned oil prices but the rising fears over the global growth outlook meant any gains were limited.
The Organization of the Petroleum Exporting Countries, in a monthly report, also said demand for its crude would be lower than expected in 2013 because of higher supply from rival producers.
Brent futures were up 0.2 percent at $110.54 per barrel while February crude futures rose 1 percent to $94.22 on an unexpected drop in U.S. crude oil stockpiles.
(Editing by Dan Grebler)
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