Subdued U.S. Growth Weighs On World Markets

LONDON (AP) — European and U.S. stock markets dropped sharply Friday after figures showed the U.S. economy slowed faster than expected in the second quarter, further eroding confidence in the recovery in the world's largest economy. In Europe, the FTSE 100 index of leading British shares was down 54.

LONDON (AP) — European and U.S. stock markets dropped sharply Friday after figures showed the U.S. economy slowed faster than expected in the second quarter, further eroding confidence in the recovery in the world's largest economy.

In Europe, the FTSE 100 index of leading British shares was down 54.40 points, or 1 percent, at 5,259.55 while Germany's DAX fell 65.83 points, or 1.1 percent, at 6,068.87. The CAC-40 in France was 38.23 points, or 1.1 percent, lower at 3,613.68.

In the U.S., the Dow Jones industrial average was down 107.10 points, or 1 percent, at 10,360.06 soon after the open while the broader Standard & Poor's 500 index fell 12.13 points, or 1.1 percent, to 1,089.40.

The selling pressure, already evident in Europe and Asia, picked up after the Commerce Department confirmed that growth in the U.S. slowed to an annualized pace of 2.4 percent. That was its most sluggish rate in nearly a year and even lower than market expectations of a 2.6 percent increase.

Some of the disappointment, though, was tempered by revisions showing the U.S. economy grew at a 3.7 percent pace in the first three months of this year, a full percentage point more than the previous estimate last month.

Nevertheless, the current market concern is that the U.S. economy is stalling and that the level of growth isn't high enough to start getting unemployment down.

"Data revisions have altered the cyclical profile but don't change the story that the pace of recovery is now slowing," said Neil MacKinnon, global macro strategist at VTB Capital.

Concerns about the U.S. economy have increased through the week, as a run of disappointing economic data was capped by a warning from the Federal Reserve that the U.S. economy is losing its momentum.

However, the GDP data is backward-looking and investors are already turning their eyes towards next week's U.S. nonfarm payrolls data for July. Always a driver for markets, the July data could set the tone for the rest of the summer months.

The dollar has borne the brunt of market concerns this week about the pace of the U.S. economic recovery. On Thursday, the euro managed to hit a new 11-week high of $1.3106.

However, the reaction to the GDP data was fairly muted in the currency markets.

"Players appear comfortable with current currency levels going into both the weekend and month-end," said Michael Woolfolk, a senior currency strategist at Bank of New York Mellon.

By mid afternoon London time, the euro was hovering around the $1.3010 mark, more or less where it was trading before the growth numbers emerged.

With the focus so heavily on the U.S. data, there's been little market impact from another array of positive earnings, from the likes of Japanese electronics companies Samsung and Sony, British Airways and French electronics firm Alcatel-Lucent.

Earlier in Asia, Japan's Nikkei 225 stock average dropped for a second day, by 1.6 percent to 9,537.30. The Nikkei was hit again by the continuing export-sapping appreciation of the yen. A strong yen also reduces the value of profits brought back from overseas — a major concern for Japanese exporters this year.

By mid afternoon London time, the dollar was 0.4 percent lower at 86.52 yen.

Elsewhere, South Korea's Kospi declined 0.7 percent to 1,759.33 and the S&P/ASX 200 in Australia fell 0.7 percent to 4,493.50. China's Shanghai Composite Index gave up 0.4 percent to 2,637.50 and benchmarks in Taiwan, Singapore and Indonesia also retreated. Markets in Malaysia, New Zealand and Vietnam rose.

Benchmark crude for September delivery was down $1.26 at $77.10 a barrel in electronic trading on the New York Mercantile Exchange. The contract rose $1.37 to settle at $78.36 on Thursday.

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