Stocks Recover Their Poise Over US Economic News

AP Europe Business Editor

LONDON (AP) - Stock markets in Europe clawed back some of their earlier losses Monday after orders for long-lasting U.S. factory goods fell sharply last month, raising hopes that the planned phase-out of the U.S. Federal Reserve's bond-buying program might be delayed.

The U.S. Commerce Department said orders for durable goods plunged 7.3 percent in July, as demand for commercial aircraft plummeted and businesses spent less on computers and electrical equipment.

The durable goods figures followed a report Friday revealing that new home sales in the U.S. tumbled last month, raising questions about the strength of the recovery in the U.S. housing market, a key piece of the country's overall economy.

Since May, the Fed has been signaling that it could slow its massive $85 billion-per-month bond-buying program - which has buoyed global markets and helped keep U.S. interest rates down - as long as the U.S. economy continues to show signs of improvement.

This has worried investors, who fear that the withdrawal of support would hit stock prices and currencies around the world.

Markets, therefore, have been seeing any piece of disappointing news from the U.S. as a reason to suspect the Fed might stick with its current monetary stimulus or only reduce its "tapering" very gradually.

By close of trading in Europe Monday, Germany's DAX had risen 0.22 percent to 8,435. Meanwhile, France's CAC-40 improved from the morning's drop to close barely unchanged, down 0.06 percent, at 4,067. Markets in Britain were shut for a public holiday. Italy's FTSE MIB was immune to the news from the U.S., however, falling 2.1 percent to 16,977 on continuing fears about the stability of the country's coalition government.

Wall Street traded higher on the durable goods figures, with Dow Jones industrial index up 0.17 percent to 15,036 and the broader S&P 500 up 0.26 percent to 1,667.

In currencies, the euro was barely changed, down to $1.3367 from $1.3386 late Friday. The dollar fell to 98.63 yen from 98.71 yen.

Zachary Griffiths, an analyst with Wells Fargo Economics, felt that concerns about "tapering" have not gone away.

"Despite today's weak economic release out of the U.S., our bias is still for strength in the greenback for the near term, and weakness among emerging currencies," he wrote.

Asian stock markets outside of Japan were mostly higher Monday. Daniel Martin of Capital Economics in Singapore said he believes the markets were mostly rebounding from an aggressive sell-off last week and not the Friday housing data.

"I don't think markets revise their views on tapering from one piece of data," he said. "There will come a point very soon, if it hasn't already happened, when investors realize that tapering won't be some kind of huge disaster."

Hong Kong's Hang Seng rose 0.7 percent to 22,005.32 while Japan's Nikkei 225 retreated by 0.2 percent to close at 13,636.28. Benchmarks in mainland China, India, Taiwan, New Zealand and Thailand also rose.

Benchmark oil for October delivery was down 27 cents to $106.15 per barrel in electronic trading on the New York Mercantile Exchange. The contract gained $1.39, or 1.4 percent, to close at $106.42 on Friday.

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