GLOBAL MARKETS-Growth fears hit stocks, investors eye Fed and Draghi

Reuters - UK Focus

By Jamie McGeever

LONDON, July 9 (Reuters) - World stocks fell on Wednesday as

a decline in Chinese inflation and weaker European industrial

data combined to suggest global growth may be slowing, eclipsing

a positive start to the U.S. earnings season.

The mining company Alcoa Inc (NYSE: AA - news) reported results after

Wall Street closed that beat analysts' expectations, but that

was not enough to help European equities recover after they fell

the most in three months on Tuesday.

Major currencies and bond markets were steady before a

speech by European Central Bank President Mario Draghi and the

release of the U.S. Federal Reserve's minutes of its latest


"Growth continues to be a concern in the developed world,"

said Mark Burgess, chief investment officer at Threadneedle

Investments in London. "I don't think the developed world can

handle short, aggressive interest rate rises. The last thing

anyone wants to do is stifle growth."

Overnight, China's consumer price index rose 2.3 percent in

June from a year earlier, shy of the consensus forecast of 2.4

percent, and a sign economic activity may be cooling.

At midday in London, the FTSEuroFirst 300 index of leading

European shares was down 0.3 percent at 1,359 points.

Germany's DAX was down 0.1 percent at at 9,766 points

and France's CAC 40 was down 0.2 percent at 4,333 points


Britain's FTSE 100 was down 0.5 percent at 6,703 points

, hit hard by the insurance sector. Admiral Group (LSE: ADM.L - news) fell 6

percent after issuing a trading statement update, and

Aviva (Other OTC: AIVAF - news) was down 3.7 percent

Portuguese stocks lagged their European peers, falling 2.2

percent on concerns about the financial health of one

of the country's largest financial groups, Espirito Santo

Financial Group. ESFG is the main shareholder of

Portugal's largest listed bank, Banco Espirito Santo.

The Group's shares were down 11 percent.


Portguese bonds also underperformed, with the 10-year yield

spiking to a six-week high just shy of 3.9 percent,

while Greek yields ticked up to a one-month high of 6.17 percent

as the country prepared to issue a new three-year


Major bond markets were stronger, however, before the Fed

minutes and Draghi's appearance in London, where he delivered

his famous speech almost exactly two years ago pledging to do

"whatever it takes" to save the euro.

The benchmark 10-year Treasury yield was

unchanged at 2.565 percent. The yield on Germany's Bund slipped

to a fresh one-year low of 1.21 percent.

In currency markets, the euro was unchanged at $1.3607

, while the dollar inched up against the yen to 101.66 yen


The dollar has fallen back below a key long-term technical

indicator against the yen this week. That's the 200-day moving

average, which on Wednesday was 101.83 yen, suggesting it may

not strengthen much - if at all - in the coming days and weeks.

Upbeat June U.S. employment data last week prompted some

Wall Street economists to predict the Fed would raise interest

rates earlier than previously thought. But yields have fallen

since then, with investors cautious about the strength of the


Disappointing German economic data on Tuesday kept the

benchmark Bund yield anchored, and later on Wednesday investors

will look to Draghi for signs the ECB could ease policy further

to support the euro zone economy.

"If the ECB embarks on a round of assets purchases, it could

push peripheral yields down another notch as investors view

these assets as being backstopped by the central bank," Rabobank

said in a note to clients.

In commodities trading, Brent oil fell 0.2 percent

to $108.73 per barrel. It has lost 3.5 percent so far this


Gold was up 0.4 percent at $1,324.00 an ounce as

markets waited for the Fed minutes.

(Reporting by Jamie McGeever, additional reporting by Sudip

Kar-Gupta; Editing by Larry King; To read Reuters Global

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