Thursday, August 9, 2012

Markets ease ahead of Chinese data

LONDON (AP) — Markets gave up some recent gains Wednesday after more downbeat European economic news and ahead of a raft of Chinese data that will shed light on the state of the world's second-largest economy.


Over the past couple of weeks, investors have chased up stocks, the euro and commodities like crude oil on hopes of further economic support from central banks, particularly from the European Central Bank.

While it's trying to come up with a strategy to ease Europe's debt crisis, the ECB also has to contend with a waning European economy.

The Banque de France said Wednesday it expects the French economy, Europe's second biggest, to slip into recession in the third quarter as a result of the protracted crisis. In Germany, official figures showed industrial production and exports fell in June.

Many of Europe's stock indexes have hit multi-month highs on hopes the ECB will soon unveil a new anti-crisis strategy.

Those hopes have helped ease the bond market pressure on Italy and Spain. The latter has seen its benchmark ten-year bond yield settle below the 7 percent threshold considered unsustainable in the long run.

"The effect appears to be fading now, with people now waiting for the eurozone to take the next step," said James Hughes, chief market analyst at CMC Markets.

"Even details confirming how the scheme would work, and when it will begin, would see the rally continue.

Until then, we're unlikely to see any major moves in either direction." In Europe, Germany's DAX lost 0.03 percent to 6,966 while France's CAC-40 was 0.43 percent lower at 3,438.

Britain's FTSE 100 fell 0.08 percent to 5,845 after the Bank of England cut its growth and inflation forecasts, confirming many economists' expectations that it will provide more monetary stimulus later this year.

The euro has also clambered off its recent two-year low against the dollar of around $1.18. In line with the general market mood Wednesday, Europe's single currency was down 0.2 percent at $1.2363.

In the U.S., the Dow Jones industrial average was up 0.1 percent at 13,184 while the broader S&P 500 index was up 0.09 percent to 1,402.

On Tuesday, the S&P index closed above the 1,400 level for the first time since early May, a clear illustration of the upbeat mood in markets despite ongoing worries over Europe's debt crisis and patchy economic data out of the U.S.

With many investors on holiday, particularly in the U.S. and Europe, there's little for traders to get their teeth into.

"Traders seem largely content to sit on their hands right now, at least until we see that array of data released from China," said Fawad Razaqzada, market strategist at GFT Markets. On Thursday, investors will have Chinese inflation, factory output and retail sales data to digest.

Analysts expect inflation to fall further, which would give authorities in Beijing room to shore up slowing growth by easing credit without fear of igniting a spike in consumer prices.

Earlier in Asia, most markets ended higher. Japan's Nikkei 225 index rose 0.9 percent to 8,881.16. South Korea's Kospi added 0.9 percent to 1,903.23 as sentiment improved a day ahead of a Bank of Korea meeting where policy makers are expected to lower interest rates to stimulate the economy.

And China's main index in Shanghai rose 0.2 percent at 2,160.99. But Hong Kong's Hang Seng index fell marginally to 20,065.52 as investors became cautious ahead of the release of the key economic data in China.

Oil prices were higher as traders waited to see if a tropical storm could affect some of Mexico's crude production — benchmark crude for September delivery was up 36 cents at $94.06 a barrel in electronic trading on the New York Mercantile Exchange.

yahoo.com

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