World markets drop as strong yen knocks Japan shares, China shows more signs of slowdown

World stocks drop as China slows, yen knocks Japan

BANGKOK — World markets slid Wednesday as strength in the yen knocked Japanese shares and China’s economy showed more signs of slowdown, offsetting halfhearted enthusiasm for the U.S. Federal Reserve’s new stimulus measures.

The Nikkei 225 stock average led losses, diving more than 2.5 percent as the yen continued to climb against the dollar, hitting shares of exporters. Major European markets were all in the red as trading got underway on the continent and futures augured losses on Wall Street.

But Chinese shares bucked the global downdraft to rise on hopes that Beijing will loosen monetary policy to support economic expansion.

The weak showing in Asian and European markets came after Wall Street rallied off its lows but still closed in the red amid a limp reception for the Fed’s announcement it will use money from its mortgage securities investments to buy government debt on a small scale.

The hope is that this will send long-term rates on debt and mortgages lower, stimulating lending to consumers and business, and reinvigorating the tepid recovery in the world’s largest economy.

The U.S. central bank also issued an assessment of the economy that was darker than a month earlier, saying the pace of the economic recovery will likely be more gradual than previously thought.

Economic news from China continued to point to a slowdown. Industrial growth slowed for the fifth month in July as Beijing clamped down on a credit boom. Growth in retail sales and investment in factories also slowed and came a day after trade figures showed that China’s appetite for imports was waning.

“This tells us economic growth is continuing to slow,” said economist Zhu Jianfang of Citic Securities in Beijing. “If they don’t make changes, the economy will see a danger of further sliding.”

A further fall in Chinese growth could have global repercussions if it hurts demand for U.S. and European factory equipment, industrial components from Asian economies and iron ore and other raw materials from Australia, Brazil and elsewhere.

In Europe, Britain’s FTSE 100 was off 0.6 percent, France’s CAC-40 declined 0.9 percent and Germany’s DAX fell 1.1 percent. Dow futures were down 104 points, or 1 percent, at 10,514 and broader S&P futures shed 12.5, or 1.1 percent, to 1,107.20.

Japan’s Nikkei closed down 258.20, or 2.7 percent, at 9,292.85 amid expectations the yen’s sustained strength will eat into the profits of Japanese exporters. Sony Corp. slid 2.8 percent and Nissan Motor Co. tumbled 3.6 percent.

South Korea’s Kospi lost 1.3 percent to 1,758.19, Australia’s S&P/ASX 200 dropped 1.9 percent to 4,455.50 and Hong Kong’s Hang Seng shed 0.8 percent to 21,294.54. Markets in India, Singapore, Taiwan, New Zealand, Malaysia and Indonesia also fell.

But the Shanghai Composite Index gained 0.5 percent to 2,607.50 after a big loss the day before.

“Although the Chinese economy is slowing, today’s data propelled renewed hopes that the government will relax monetary policies,” said Zhang Fan, analyst for Debon Securities in Shanghai. “Inflation probably has peaked in July and will ease for the rest of the year.”

In the U.S. on Tuesday, the Dow Jones industrial average fell 0.5 percent to end at 10,644.25. That marked a fall of 54 — it was down about 100 points before the Fed’s announcement. The broader Standard & Poor’s 500 index fell 6.73 points to 1,121.06.

In currencies, the dollar slipped to 85.06 yen from 85.31 yen late Tuesday in New York. The euro fell to $1.3060 from $1.3175.

Benchmark crude for September delivery was down 76 cents to $79.49 a barrel in electronic trading on the New York Mercantile Exchange. The contract lost $1.23 to settle at $80.25 on Tuesday.

AP Business Writer Joe McDonald in Beijing contributed to this report.