In The News

U.S. growth downgrade weighs on world markets

LONDON— European stock markets and Wall Street futures gave up earlier gains Tuesday after figures showed that the U.S. economy grew less than previously estimated in the third quarter.

Wall Street was poised to open higher — Dow futures were up 33 points, or 0.3 percent, at 10,375 while the broader Standard & Poor's 500 futures rose 3.8 points, or 0.3 percent, at 1,112.

However, European markets and Wall Street futures had been trading even higher before the Commerce Department reported that the U.S. economy grew at an annualized rate of 2.2 percent in the third quarter.

That was way down on its previous estimate of 2.8 percent made just a month ago and stoked concerns that the recovery in the world's largest economy may not be as strong as anticipated in the markets.

The data, though, is backward-looking and investors may get a better idea of how the recovery is progressing by November existing home sales figures later, especially as the U.S. housing market was one of the main reasons why the world slid into recession. The consensus in the markets is that they ticked up a further 3.3 percent to around 6.3 million units.

This week's gains have come as something of a surprise as many analysts were anticipating a modest pullback as investors shut up shop for the year by booking profits accumulated during the nine-month bull market.

However, confidence surrounding the global economic recovery has continued to grow. That has been most evident in a raft of corporate deals but also in Tuesday's announcement that the British economy did not contract as much as previously thought during the third quarter — the country's statistics office said the British economy shrank by only 0.2 percent in during the July-September period, lower than its previous estimate of 0.3 percent.

"Keeping sentiment positive was the latest revision of the UK GDP figure for the third quarter," said David Jones, chief market strategist at IG Index.

The dollar has bounced back from 15-month lows against the euro in the last three weeks amid mounting expectations that the U.S. Federal Reserve will start withdrawing its extraordinary liquidity measures and raising interest rates sooner than expected. The euro has been dogged by concerns over the economic situation in a number of European countries.

Oil fell back towards the $73 a barrel after oil cartel OPEC kept production levels unchanged.

Benchmark crude for February delivery was down 63 cents at $73.76 in electronic trading on the New York Mercantile Exchange.

Kevin Jones of The Trucker staff can be contacted to comment on this article at [email protected] .

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