Stocks dip on China fears, warning to France

NEW YORK: World stocks slipped on Tuesday and government bonds rose as slower-than-expected Chinese growth and a warning to France about keeping its top credit rating turned investors cautious.

The warning from ratings agency Moody's compounded investor jitters after comments this week by Germany's finance minister, who said he saw no definitive solution on the euro zone debt crisis right away.

The MSCI world equity index was down 0.6 percent, paring earlier losses as US stocks turned modestly higher. The world index is still up roughly 11 percent from a 15-month low earlier this month.

US stocks' gains were led by the financial sector after major banks reported quarterly results, including Bank of America. The second-largest US bank by assets rose 6.8 percent to $6.44, while shares of Goldman Sachs were up 2 percent at $98.90 even after it posted a wider-than-expected quarterly loss.

The Dow Jones industrial average was up 21.19 points, or 0.19 percent, at 11,418.19. The Standard & Poor's 500 Index was up 5.21 points, or 0.43 percent, at 1,206.07. The Nasdaq Composite Index was up 3.75 points, or 0.14 percent, at 2,618.67.

European stocks dipped 0.2 percent while emerging stocks lost 2.3 percent.

"Risk aversion came back because everybody is focused on Europe," said Suvrat Prakash, interest rate strategist at BNP Paribas in New York. "It seems that people are not counting on the European Union summit," for a solution on the euro zone's fiscal problems.

Moody's cautioned it may slap a negative outlook on France's Aaa credit rating in the next three months if costs from helping to bail out banks and other euro zone members stretch its budget too thin.

Optimism over a key European Union summit on Oct. 23 waned after German Finance Minister Wolfgang Schaeuble said on Monday that even though European governments would adopt a five-point platform to address the crisis, a definitive solution would not be reached at the summit.

In Asia, China's gross domestic product growth eased to 9.1 percent in July-September at an annual rate, slightly below forecasts of 9.2 percent, indicating the world's second-largest economy expanded at its slowest pace since the second quarter of 2009.

US Treasuries edged higher, pushing benchmark yields to their lowest in two weeks.

Benchmark 10-year Treasury prices rose 13/32 in price to yield 2.11 percent compared with 2.18 percent late on Monday. Yields fell as low as 2.08 percent, their lowest since Oct 7.

The French/German 10-year government bond yield spread widened to a euro era record of 101 basis points. French debt also underperformed its triple-A rated peer the Netherlands.

Brent crude oil prices were lower, while the dollar gained 0.4 percent against a basket of major currencies. The euro fell 0.3 percent to $1.3701.

After the US stock market's close on Tuesday, Apple was due to report results. Its shares were down 0.1 percent at $419.40.

Copyright Reuters, 2011