European markets fall as worries about protests offset optimism that Fed will help economy

By Carlo Piovano, AP
Wednesday, September 29, 2010

European strikes weigh on stock markets

LONDON — European markets fell Wednesday as protests against austerity measures raised worries about countries’ ability to cut heavy debt loads, offsetting for now any hopes that the Federal Reserve might move to boost the U.S. economy.

Demonstrators gathered in Brussels, the heart of the EU, as well as Spain and Ireland as labor unions protested against spending cuts they say unfairly penalize average workers for problems and debt caused by banks.

The social unrest has raised concerns that countries like Spain, whose debt some say could be downgraded again soon, will not be able to implement the policies required to heal their bloated public finances.

In Britain, the FTSE 100 was down 0.2 percent at 5,566.30 while Germany’s DAX was 0.5 percent lower at 6,246.52. France’s CAC-40 was down 0.2 percent at 3,754.24.

Asian markets closed higher earlier, supported by growing speculation that the Fed might announce further stimulus measures at the end of a Nov. 2-3 meeting in a bid to shore up the recovery in the U.S. economy.

But Wall Street was expected to follow Europe lower when it opens. Dow futures were down 0.2 percent and Standard & Poor’s 500 futures were 0.3 percent lower.

Worries have flared up again this week that Europe will not be able to lower its deficits and simultaneously sustain economic growth and keep failed banks from collapsing.

In Ireland, where the government is struggling to manage Anglo Irish Banks’ €72 billion ($97 billion) in outstanding debts, protesters drove a truck into the parliament’s gates. In Spain, workers staged a general strike and in Brussels tens of thousands were expected to march toward the main EU buildings, where the EU executive will meet.

The Commission is expected to propose new rules to sanction countries that break deficit rules. Labor unions say this will push governments to force through spending cuts that will unjustly penalize workers for a crisis caused by the bailed-out financial sector.

While Germany and the Commission are for tougher rules, France is against near-automatic sanctions, saying politicians, and not unelected officials in Brussels, should determine government policy.

Corporate did not offer much support to European investors, with Swedish fashion retailer H&M warning that its store openings for the rest of the year would be slowed by delayed construction projects. Although it reported higher profits, the announcement pushed shares down around 6 percent in Stockholm.

In Asia, markets closed higher as investors focused on the likelihood that the Fed would help the U.S. economy.

Japan’s benchmark Nikkei 225 stock average closed 0.7 percent higher at 9,559.38. Sentiment was upbeat there as a key central bank survey of business confidence at major Japanese manufacturers improved for the sixth straight quarter. But companies also signaled they are anxious about the future amid cooling global growth and a strong yen.

The Bank of Japan’s quarterly “tankan” survey showed that the main index for large manufacturers stood at 8, up from 1 three months ago.

In Hong Kong, the Hang Seng Index gained 268.72 points, or 1.2 percent, to 22,378.67 while South Korea’s Kospi increased 10.48, or 0.6 percent, to 1,866.45. Markets in Singapore, Taiwan, Thailand and Indonesia also climbed.

Australia’s S&P/ASX 200 index closed down 0.5 percent at 4,645.00 and the Shanghai Composite Index retreated less than 0.1 percent to 2,610.68.

In currencies, the dollar fell to 83.62 yen from 83.85 yen late Tuesday in New York. The euro rose to $1.3602, near a new five-month high, from $1.3574.

Benchmark crude for November delivery was up 13 cents at $76.31 a barrel in electronic trading on the New York Mercantile Exchange. The contract lost 34 cents to settle at $76.18 on Tuesday.

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