Tags: Economic- Crisis | World | Markets

World Stocks Mostly Lower on US Recovery Worries

Monday, 05 Jul 2010 06:36 PM

World stocks finished mostly lower Monday amid worries that the economic recovery in the U.S. will slow down, with trading light as Wall Street remained closed for the Independence Day long weekend.

A disappointing jobs report from the U.S. on Friday suggested the world's largest economy is stuttering, while other figures indicate China — which booked good growth during the recent years of financial and economic turmoil — could also slow down.

European markets found some support during the session in a report showing retail sales in the region rose modestly in May, but ended slightly lower. The British FTSE 100 and Germany's DAX both finished down 0.3 percent at 4,823.53 and 5,816.20, respectively. France's CAC-40 was down about 0.5 percent at 3,332.46.

Asian markets were mixed at the close, with the Shanghai index down but Japan's Nikkei up.

"Growth fears have in particular been centered on the U.S. in the wake of a run of disappointing data," said Mitul Kotecha, an analyst at Credit Agricole.

While some investors may be quietly buying back into the market after heavy losses last week, overall sentiment is cautious. Besides the weak jobs data, U.S. indicators have recently shown a drop in home sales, a fall in consumer confidence and a slide in manufacturing activity. That spooked investors already fretting over the European debt crisis and its impact on major trading partners like the U.S. and in Asia.

Volumes remained light, with trading closed in the U.S. European indexes were buoyed slightly by a report showing eurozone retail sales rose 0.2 percent on the month in May. However, consumer spending in Europe remains well below long-term averages and is considered a weak link in the 16-nation eurozone's recovery.

Howard Archer, an economist at IHS Global Insight, noted the rise in May did not make up for a sharper 0.9 percent slump in April.

"The signs are hardly encouraging for any significant sustained pick up in the near term at least," he said.

In Asia, some investors worried that massive bank lending in China last year, intended to support Beijing's stimulus program, may spark a wave of defaults. Chinese companies that overspent on factories and other assets may be unable to repay their debts.

Also, local government finance agencies borrowed heavily for infrastructure and other projects, and the World Bank and Chinese regulators say lenders might face losses if those agencies default. Premier Wen Jiabao, China's top economic official, said over the weekend the nation's recovery is facing more problems than expected. Indicators from manufacturing to auto sales suggest economic growth might slow.

The benchmark Shanghai Composite Index lost 18.95 points, or 0.8 percent, to close at 2,363.95, the lowest level in 15 months.

Japan's benchmark Nikkei 225 stock index added 63.07 points, or 0.7 percent, to 9,266.78.

Kazuhiro Takahashi, an equity strategist at Daiwa SMBC Securities Co. Ltd., said the Nikkei climbed on bargain-hunting following earlier losses.

"Investors chased gains in exporters, but many took a wait-and-see stance as the U.S. financial markets are closed Monday," Takahashi said. "The disappointing U.S. jobs report was a fresh sign that the pace of the U.S. economic recovery is slower than expected."

Investors in Asia also were reluctant to chase gains after the Dow Jones industrial average fell 46.05 points, or 0.5 percent, to 9,686.48 Friday, the seventh straight day of decline.

It was also the longest losing streak since the height of the financial crisis in October 2008.

South Korea's Kospi increased 0.2 percent, to 1,675.37, and Australia's S&P/ASX 200 was down 0.4 percent at 4,222.1. Elsewhere, Hong Kong's Hang Seng index fell 0.3 percent to 19,842.20. Markets in Taiwan and New Zealand edged up.

Benchmark crude for August delivery rose 17 cents to $72.31 a barrel in electronic trading on the New York Mercantile Exchange. The contract lost 81 cents to settle at $72.14 on Friday.


Associated Press writers Pamela Sampson in Bangkok and Shino Yuasa in Tokyo contributed to this report.

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