LONDON – The spread of economic gloom to company performance pulled equities sharply lower on Friday, driving European equities below last year's lows, while Britain's formal arrival in recession hit the pound again.
Britain said its fourth quarter gross domestic product shrank 1.5 percent. Sterling hit a 23-year low against the dollar below $1.36.
Earnings worries were to the fore. Japanese stocks ended the week at a two-month closing low, dragged lower by technology and entertainment giant Sony's (6758.T) forecast of a record $2.9 billion annual loss on sliding demand.
It followed heavy losses overnight on Wall Street, where Microsoft (MSFT.O) cautioned that it could no longer offer profit forecasts for the rest of the fiscal year after posting a quarterly profit that fell short of expectations.
In Europe, the FTSEurofirst 300 (.FTEU3) index was down around 1.4 percent, working on its 12th session of decline out of 13.
"Earnings have been as bad as expected," said Bernard McAlinden, investment strategist at NCB Stockbrokers. "The test is whether the markets have discounted that or not. But they seem to be taking it nervously."
Japan's Nikkei stock average (.N225) earlier lost 3.8 percent.
In a report on investment flows, State Street said its latest calculations showed cross-border equity flows running at one of the most risk-averse levels for a record 118 trading days.
"The one optimistic sign is that emerging market flows have rebounded." it said.
The mood of investor caution lifted currencies that currently benefit from risk aversion.
The dollar was up more than 1 percent against a basket of major currencies (.DXY), with the euro falling 1.2 percent to a six-week low. It was at $1.2828.
Britain's pound, which has fallen around 8 percent against the dollar this week, was at $1.3641, down 1.7 percent.
"It is very much a case of continued worry about the global economy," BNP Paribas currency strategist Ian Stannard said of currencies in general.
Demand for bonds were mixed.
Two-year yields were 4 basis points lower on the day at 1.396 percent while 10-year Bund yields were up 3 basis points at 3.133 percent, steepening the 2-10-year bond yield curve.
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