World stock markets fall as economy worries linger; Nikkei dragged by strong yen

Tuesday, August 24, 2010

World stock markets fall as economy worries linger

BANGKOK — World stock markets retreated Tuesday as the strong yen knocked Japanese shares and investors anticipated more bad news from U.S. economic reports this week.

Markets have spent most of August in the red as economic indicators from the U.S., China, Japan and elsewhere suggested global growth will slow in the second half of the year, dimming earnings prospects for manufacturers and other exporters.

This week investors are awaiting reports on home sales, durable goods orders, consumer confidence and revised second quarter GDP from the U.S. — the world’s biggest economy and an important market for companies from China to Germany. Reports on existing and new U.S. home sales are due out Tuesday and Wednesday.

The slew of weaker indicators has raised fears the world economy will slip back into recession though some analysts say those worries are overblown.

“A double-dip is unlikely given that governments are set to reinforce stimulus packages,” Woori Investment & Securities analysts said in a report. “Robust economic growth in Asia is offsetting sluggish advanced economies, indicating that the global real economy is still resilient.”

Benchmarks in Europe got off to a dour start. France’s CAC-40 slid 1.5 percent, Germany’s DAX tumbled 1 percent and Britain’s FTSE 100 lost 1.1 percent.

Wall Street was set to fall. Dow futures were down 81 points, or 0.8 percent, at 10,076.00 and broader S&P futures were off 8.9, or 0.9 percent, at 1056.30.

Exporter shares in Japan wilted as the dollar hit a new 15-year low against the yen amid uncertainty about whether Japan would do anything to weaken its currency. Prime Minister Naoto Kan and Bank of Japan Gov. Masaaki Shirakawa held a phone conversation Monday but did not discuss foreign exchange intervention.

The Nikkei 225 stock average led broad declines in Asia, down 121.55 points, or 1.3 percent, at 8,995.14 — slipping under the 9,000 level for the first time since May 2009. Sony Corp. shed 3.7 percent, and Canon Inc. fell 0.9 percent.

Hong Kong’s Hang Seng sank 1.1 percent at 20,658.71, South Korea’s Kospi fell 0.4 percent to 1,760.53 and Australia’s S&P/ASX 200 dropped 1.1 percent to 4,381.30.

Markets in India, Taiwan, Singapore, Indonesia and Thailand also fell. China’s Shanghai Composite Index rose 0.4 percent to 2,650.31.

Australian brewer Foster’s Group Ltd. plunged 4.3 percent after reporting a full year loss. It said a split of its beer and wine business into separate companies was on track for the first half of 2011.

The issue had jumped 6.5 percent the previous day on speculation that beverage groups SABMiller and Asahi Breweries were looking to buy Foster’s beer business.

In New York on Monday, the Dow Jones industrial average lost 39.21 or 0.4 percent, to close at 10,174.41. Other major stock indexes also ended lower. The Standard & Poor’s 500 index fell 4.33, or 0.4 percent, to 1,067.36, while the Nasdaq composite index lost 20.13, or 0.9 percent, to 2,159.63.

In currencies, the dollar fell to 84.40 yen from 85.09 yen in New York late Tuesday. The euro fell to $1.2619 from $1.2629.

Benchmark crude for October delivery was down 82 cents at $72.28 a barrel in electronic trading on the New York Mercantile Exchange. The contract fell 72 cents on Monday to settle at $73.10 a barrel.

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