US markets recover from early losses but Europe still in the doldrums on crisis fears

US stocks recovered from early losses as St. Louis Federal Reserve Bank President James Bullard said policy makers should consider delaying the end of its bond purchases to halt the decline in inflation expectations.

The Standard and Poor's 500 Index was little changed at 1,863.33 as of 11:37 a.m. in New York. The index had fallen 1.5 percent earlier as quarterly results from Netflix Inc. and EBay Inc. disappointed investors. The Dow Jones Industrial Average was down 12.82 points, or 0.1 per cent, to 16,128.92. The Russell 2000 Index added 0.6 per cent and extended its three-day advance to 2.8 percent, its biggest since June.

“The Bullard comments were a short-term shot of adrenaline,” Chad Morganlander, a money manager at St. Louis- based Stifel Nicolaus and Co., which oversees about $160 billion, said in a telephone interview. “The overall markets are hooked on QE and liquidity being withdrawn.”

Speaking in an interview today with Bloomberg News, Bullard said US economic fundamentals remain strong and he blamed the market turmoil on downgrades in the outlook for Europe.

“Inflation expectations are declining in the US,” he said. “That’s an important consideration for a central bank. And for that reason I think that a logical policy response at this juncture may be to delay the end of the QE.”

Europe

In Europe however, stocks fell to this year’s low, with the benchmark index posting its longest slump in 11 years, as concern grew that a financial crisis is returning to the region’s so-called peripheral nations. Even so, the Stoxx Europe 600 Index pared a decline of as much as 2.9 per cent after St. Louis Federal Reserve Bank President James Bullard said the Fed should consider delaying the end of its bond purchase program.

“We’ve reached the part of the cycle where bad news is bad news,” Steen Jakobsen, chief investment officer at Saxo Bank A/S in Copenhagen, said in a phone interview. “For years, we’ve been trading on monetary policy. Now we have to deal with real economic problems, and that of course, for the markets is a totally different kettle of fish.”

National benchmark indexes dropped in 15 of the 18 markets in western Europe. Portugal’s PSI 20 Index slumped 3.2 per cent to a two-year low, Spain’s IBEX 35 Index lost 1.5 per cent to this year’s low. Volume changing hands in Stoxx 600 companies was more than double the 30-day average, according to data compiled by Bloomberg.

UK

UK stocks retreated to their lowest level in more than 15 months as Shire Plc extended losses and a gauge of banks declined. The FTSE 100 Index fell 15.73 points, or 0.3 percent, to 6,195.91 at the close of trading in London, after earlier sliding as much as 2.2 per cent.

Nestle SA slipped 3 per cent to 64.95 Swiss francs. The world's biggest food company said nine-month sales excluding acquisitions increased 4.5 per cent, missing the 4.7 per cent gain expected by analysts. Shire Plc, which yesterday plunged the most in 11 years, tumbled 7.3 per cent to 3,718 pence today, after AbbVie Inc.'s board formally asked shareholders to vote against its takeover of the company. Man Group advanced 3.1 per cent to 111.7 pence. The world's largest publicly traded hedge-fund manager said assets under management jumped 25 per cent in the third quarter, in line with some analysts' estimates, helped by acquisitions in the US.

Bloomberg