LONDON – Technology stocks crumpled and emerging market currencies continued to come under pressure on Monday, driven by fears that corporate earnings would remain weak and amid instability in Turkey and Latin America.
The dollar fell a quarter percent against the yen hurt by last week's soft US jobs data, but was steady against the euro after the world's leading central bankers said a strong dollar was hurting U.S. growth.
But bonds failed to get much safe haven benefit, with yields rising in European and U.S. government debt as U.S. stock market futures pointed to a stable opening on Wall Street.
Stock market investors were scanning the horizon for any new evidence of corporate weakness, unnerved by a string of earnings reports last week which showed the technology sector worldwide was suffering from a capital investment recession.
``The summer months tend to bring a declining trend and we would not be surprised if that happened this year,'' said John Smith, head of strategy at Brown Shipley Investment Managers.
The DJ Stoxx pan-European technology index fell 3.4 percent after hitting its lowest level since mid-December 1998.
Nokia was at one point down 7.3 percent at 21.26 euros though off earlier lows, unnerved by earnings worries in the sector.
The pan-European FTSE Eurotop 300 index was down 0.6 percent, while the euro zone's Euro Stoxx 50 benchmark slipped 0.8 percent.
The whole telecoms equipment sector is waiting for the U.S. earnings season to gather pace with Motorola reporting on Wednesday.
Asian stock markets fell virtually across the board on Monday following another selloff on Wall Street as more corporate profit warnings dashed hopes of an economic -- and earnings -- recovery.
Markets took little solace from a weekend meeting in Rome of finance ministers from the world's seven richest nations where the official line was the worst was probably over and the United States should lead the world back to growth next year.
Tokyo shares fell 0.54 percent while U.S. S&P 500 index futures pointed to small gains when Wall Street reopens.
EMERGING MARKETS PRESSURED
Most emerging currencies weakened with the Polish zloty leading the way lower pressured by Polish official statements at the weekend about an increased budget shortfall.
The South African rand hit a new record low against the dollar, extending Friday's falls on jitters over a domestic land grab. Most emerging currencies fell sharply on Friday reacting to worries over Latin American economies.
The Turkish lira rose but stocks fell on Monday in a mixed reaction to government moves to end a row over Turk Telekom that has prompted fears a $15.7 billion crisis rescue pact with the IMF might be in jeopardy.
The main ISE National-100 index was down 1.64 percent at 9,998.60 points in afternoon trade, rubbing out earlier gains as analysts found a government pledge to appoint a new board for Turk Telekom short on details.
The zloty tested Friday's 6-1/2 month lows around 4.2750 to the dollar and hit 2-1/2 month lows around 3.62 against the euro.
On Saturday, a senior finance ministry official said Poland's budget shortfall this year could reach 17 billion zlotys ($3.99 billion) in the worst case scenario of economic growth slowing to two percent.
The dollar fell a quarter percent against the yen, but held gains against the euro after central bankers from the largest industrial nations said the strength of the dollar was an impediment to U.S. economic growth.
Following the Group of 10 nations' meeting at the Bank for International Settlements in Basel, Switzerland, Bank of England Governor Sir Edward George said the central bankers also saw the strong dollar as fueling inflation in the euro zone.
``The combination of exchange rates is having in many senses perverse effects. It was one of the factors contributing to the imported inflation in the euro zone, which is a factor dampening consumer spending,'' George told reporters.
``Equally it is a factor which is exerting a negative effect on the U.S. economy through the trade accounts,'' he said.
At 1209 GMT, the U.S. currency was hovering around 125.50 yen, 3/4 yen away from Friday's three-month peaks.
The euro was trading around $0.8450, down a quarter percent from New York's closing levels but still a cent above Friday's eight-month lows
Two year U.S. and European government debt yields were higher on Monday after stronger German industrial data and amid signs of stability in share markets.
At 1153 GMT the two year Bund yield stood at 4.318 percent, up 1.7 basis points, the highest since May 31. Immediately after the data was released yields had pushed 2.2 basis points up on the day.
In early trade, two-year notes were 2/32 lower at 99-15/32, yielding 4.15 percent versus 4.13 percent on Friday, and five-year notes fell 3/32 to 99-1/32, yielding 4.85 percent versus 4.84 percent on Friday.