European markets mostly flat despite Spain rating downgrade; Paris’ CAC down 0.1 percent

European markets flat despite Spain downgrade

PARIS — European stock markets traded mostly flat Monday as investors shrugged off more sobering news about shaky government finances ahead of a busy schedule of U.S. economic data later in the week.

The CAC 40 index of leading French shares was down almost 3 points at 3,512.16 while Germany’s DAX rose 38.47 points or 0.7 percent to 5,984.65. Spain’s IBEX index fell 0.7 percent to 9,363.2.

Oil, meanwhile, rose above $74 a barrel, and the dollar gained against the yen and weakened against the euro.

Markets in the U.S. and Britain were closed for public holidays.

In an otherwise quiet session due to the U.K. bank holiday, investors remained focused on Europe’s debt crisis. The French parliament is scheduled to go over a revised budget bill today ahead of its expected approval of France’s share of the trillion dollar bailout for struggling member states.

German markets shrugged off the surprise resignation of President Horst Koehler. Koehler quit Monday from the largely ceremonial post after being criticized for remarks in which he appeared to link military deployments abroad with the country’s economic interests.

Eurozone inflation increased in May but remained well below the 2 percent medium-term target set by the European Central Bank, figures released by Europe’s statistics office showed Monday.

Markets had no direction from U.S. markets, which were closed for Memorial Day. But a heavy schedule of economic data due later in the week including the May jobs report is expected to drive trading as investors get a clearer picture of the economic recovery.

Comments by European Central Bank chief Jean-Claude Trichet in support of closer control of financial and economic policy across the 16-nation European currency zone were not enough to stir a reaction on markets, where volumes were thin.

In an interview with French daily Le Monde, Trichet reiterated his call for a “budgetary union” to complement the eurozone’s monetary union.

Analysts characterized the markets as volatile and saw investors holding back as doubts remain the European Union can contain a debt crisis that has sent the euro to four-year lows.

“They are still cautious at this point,” said Mark Tan, who helps manage about $15 billion of equities and bonds at UOB Asset Management in Singapore. “Liquidity in the stock market is still pretty tight.”

On Friday, the Dow Jones industrials shed 1.2 percent to 10,136.63 after Fitch Ratings gave Spain the second downgrade of its credit rating in a month. The rating agency’s action, coming just after European markets closed Friday, gave investors another reminder of the long-term economic problems still facing debt-laden countries.

The news, however, did not come as a shock to investors in Asia, where expectations of a downgrade of Spain had been circulating for some time. Markets in Asia were mixed in early trade and then mostly headed higher.

“Asians were prepared for the downgrade for Spain,” said Francis Lun, general manager of Fulbright Securities Ltd. in Hong Kong. “So Asian markets are quite stable today. Even Bangkok is up.”

Jackson Wong, vice president at Tanrich Securities in Hong Kong, also said he viewed Asia as stabilizing, despite some investor nervousness.

“The momentum is still on the positive side,” Wong said.

Japan’s Nikkei 225 stock average inched up 5.72 points, or 0.1 percent, to 9,768.7 amid news that industrial production in the world’s No. 2 economy rose for a second straight month in April, propelled by robust growth in China and the rest of Asia.

Separately, India’s economic growth accelerated to 8.6 percent in the January-March quarter, its best in two years as Asia’s third-largest economy returns to pre-crisis levels of expansion.

In currencies, the dollar rose to 91.45 yen from 91.02 yen late Friday. The euro rose to $1.2309 from $1.2272, a bump upward that may stem from the overselling of euros last week.

Benchmark crude for July delivery was up 49 cents at $74.46 a barrel in electronic trading on the New York Mercantile Exchange.

Associated Press Writer Pam Sampson in Bangkok and AP Business Writer Kelly Olsen in Seoul contributed to this report.