US and European stocks fell on Tuesday ahead of what was expected to be a dismal corporate earnings season, causing investors to shun risky assets in favor of safe havens such as the US dollar and gold. A sign of economic weakness came from revised data that showed the euro zone's gross domestic product shrank more than previously estimated in the fourth quarter, suggesting an even worse 2009 figure and a still weakening economy. US Treasuries rose as the gloomy outlook for stocks and rising concern over the poor quality of assets still haunting major banks enhanced the safe-haven allure of government debt. The Dow Jones industrial average closed down 186.29 points, or 2.34 percent, at 7,789.56. The Standard & Poor's 500 Index tumbled 19.93 points, or 2.39 percent, at 815.55. The Nasdaq Composite Index shed 45.10 points, or 2.81 percent, at 1,561.61. European shares fell for a third straight session as financial shares slipped ahead of the earnings season on renewed worries about their balance sheets. The FTSEurofirst 300 index of top European shares closed 0.7 percent lower at 761.69 points. Banks were among biggest losers. Standard Chartered fell 6.3 percent, Lloyds slipped more than 8.5 percent and UBS shed 5.2 percent. GDP in the 15 countries using the euro in the fourth quarter contracted a record 1.6 percent from the previous three months, more than the previously reported 1.5 percent. Gold remained strong as investors sought a safe haven at the start of corporate earnings season. Gold for June delivery closed up $10.50 at $883.30 in New York. The Australian dollar see-sawed against the US dollar after the Reserve Bank of Australia cut interest rates by 25 basis points to a record low 3.0 percent. The Australian dollar was last unchanged at US$0.7122. Eurodollar is being “driven down by a return to risk aversion,” said Dan Cook, a senior market analyst at IG Markets Inc. in Chicago. The dollar rose against a basket of major currencies, with the US Dollar Index up 0.55 percent at 85.211. Against the yen, the dollar fell 0.65 percent at 100.32. The euro fell 1.03 percent at $1.3268. A report by The Times of London that said the International Monetary Fund was set to forecast toxic assets on the balance sheets of financial firms could reach $4 trillion helped push bond prices higher. Whatever the final tally of bad assets, few investors are willing to bet there are no more nasty surprises lurking in the US banking sector. The benchmark 10-year US Treasury note rose 9/32 in price to yield 2.90 percent. The 2-year US Treasury note added 2/32 in price to yield 0.92 percent. Stocks snapped a five-day rally overnight in Asia, picking up on renewed concerns about the health of US banks that rattled investors in the United States and Europe on Monday. The MSCI index of Asia Pacific stocks outside Japan fell 1.25 percent while Japan's Nikkei share average slipped 0.3 percent.
