Global stocks down ahead of US jobs data; Japan’s Nikkei largely holds onto previous gains

By Pan Pylas, AP
Thursday, September 16, 2010

Global stock markets down ahead of US jobs data

LONDON — World markets mostly fell Thursday ahead of another set of U.S. jobs data and news that British retail sales fell in August for the first time since January.

In Europe, the FTSE 100 index of leading British shares was down 10.41 points, or 0.2 percent, at 5,545.15 while Germany’s DAX fell 4.17 points, or 0.1 percent, to 6,257.70. The CAC-40 in France was 10.29 points, or 0.3 percent, lower at 3,745.35.

Wall Street was poised to give up a chunk of Wednesday’s gains at the open — Dow futures were down 22 points, or 0.2 percent, at 10,487 while the broader Standard & Poor’s 500 futures fell 2.6 points, or 0.2 percent, to 1,118.10.

The actual open in the U.S. though will likely hinge on initial weekly jobless claims — the consensus in the markets is that they ticked up modestly to around 460,000 from 451,000.

“These fell sharply last week, and if it can hover around the 450,000 level again it might buoy expectations for the next employment report,” said Daragh Maher, an analyst at Credit Agricole.

Producer price data could also have an impact on how the rest of the trading session pans out — here, the consensus in the markets is that the producer price index rose modestly to 0.3 percent in August from July’s 0.2 percent.

Over the past week or so, the economic data out of the U.S. has been mostly positive and that has helped shore up stocks around the world.

The main piece of economic news in Europe was British retail sales figures for August, which unexpectedly declined by a monthly 0.5 percent, stoking fears that the U.K. economy may slip back into recession.

“August’s fall could be the first sign that the surprising resilience of consumer spending recently could be coming to an end,” said Vicky Redwood, senior U.K. economist at Capital Economics.

In Asia, Japan continued to be the main focal point after Wednesday’s massive intervention in the currency markets by the Bank of Japan. Its first direct foray into the currency market in six years has clearly helped to weaken the yen and boost the share prices of a number of the country’s businesses, who were fretting over the export-sapping appreciation of the currency.

The Nikkei 225 stock average ended little changed, as it held onto its big gain from the previous day when . The Nikkei ended 7.06 points, or 0.1 percent, lower at 9,509.50. On Wednesday, the index jumped more than 2 percent as investors cheered the intervention — the prevailing view in the markets is that the Bank of Japan splashed out around $20 billion Wednesday in its attempt to knock the yen off its 15-year highs against the dollar.

A day on, the yen remains well below the levels it was trading — by early afternon London time, the dollar was 0.1 percent lower at 85.64 yen — before the intervention it had traded as low as 82.87 yen.

Precedence suggests that the Bank of Japan will intervene in the markets once again — speaking at a business leaders’ meeting Thursday, Japan’s Prime Minister Naoto Kan said Japan will “continue to take firm action” against the yen’s rise.

Though further intervention is likely, the reaction in the markets will likely be less marked than the 3 percent decline it managed Wednesday as the element of surprise will have gone.

“It is often the case that the first bout of intervention has the most impact on the market with further intervention subject to the law of diminishing returns,” said Lee Hardman, currency economist at the Bank of Tokyo-Mitsubishi UFJ.

One impact of the intervention is that traders have turned their attention elsewhere, particularly the euro’s exchange rate with the dollar. By early afternoon London time, the euro was up 0.5 percent at $1.3084.

Meanwhile, China’s Shanghai Composite Index slid 1.9 percent to a three-week low of 2,602.46 as investors worried that the banking regulator will order banks to raise the amount of capital they hold in reserve following a surge in lending over the previous year. The Shenzhen Composite Index for China’s smaller second exchange dropped 2.2 percent to 1,156.51.

Australia’s S&P/ASX 200 dropped 1.2 percent to 4,605.30 and South Korea’s Kospi declined 0.7 percent to 1,811.85. Hong Kong’s Hang Seng fell 0.2 percent to 21,691.45.

Benchmark crude for October delivery was down 62 cents at $75.40 a barrel in electronic trading on the New York Mercantile Exchange. The contract lost 78 cents to settle at $76.02 a barrel on Wednesday.

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