European, US markets slide as worries about protests offset hopes about Fed help to economy

By Carlo Piovano, AP
Wednesday, September 29, 2010

European strikes weigh on world stock markets

LONDON — European and U.S. markets fell Wednesday as labor protests across the EU fueled worries about countries’ ability to cut heavy debt loads, offsetting any optimism about a possible economic boost from the Federal Reserve.

Demonstrators marched in Brussels, the heart of the EU, as well as Spain, Ireland and Portugal 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.

Britain’s FTSE 100 closed down 0.2 percent at 5,569.27, while Germany’s DAX was 0.5 percent lower at 6,246.92. France’s CAC-40 ended 0.7 percent lower at 3,737.12.

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 followed Europe lower. The Dow industrial average was down 0.2 percent at 10,837.59 and the Standard & Poor’s 500 was 0.2 percent lower at 1,145.24.

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 parliament’s gates with a truck. In Spain, workers staged a general strike and in Brussels tens of thousands marched toward the main EU buildings, where the EU executive was gathering.

The Commission proposed 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 news 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 more than 7 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 1.2 percent to 22,378.67 while South Korea’s Kospi increased 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 and the Shanghai Composite Index retreated less than 0.1 percent.

In currencies, the dollar fell to 83.65 yen from 83.85 yen late Tuesday in New York. The euro rose to $1.3628, near a new five-month high, from $1.3574.

Benchmark crude for November delivery was up $1.04 at $77.22 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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