World stock markets fall on Spain debt downgrade, mixed messages on possible Fed action

By Pamela Sampson, AP
Thursday, September 30, 2010

World stocks down on Spain’s debt worries

BANGKOK — World stock markets fell Thursday amid mixed messages from the Fed on how to bolster the fading U.S. economy and after Spanish government debt was downgraded over worries about the country’s finances.

Oil prices hovered below $78 a barrel in Asia after strong gains the previous day on a drop in U.S. crude supplies, a sign demand may be improving. The dollar was lower against the yen and the euro.

Major European bourses opened lower after Moody’s Investors Service downgraded Spanish debt, joining two other major credit rating agencies who have taken similar steps out of concern over the country’s public finances.

London-based Moody’s lowered the debt rating by one notch, from Aaa to Aa1, with a stable outlook, because of concerns over Spain’s weak growth prospects and what it called considerable deterioration in the government’s financial strength.

The downgrade came one day after massive European street protests against austerity measures renewed worries about the region’s finances.

Britain’s FTSE 100 index was down 0.4 percent to 5,551.65. Germany’s DAX fell 0.3 percent to 6,232.10 and France’s CAC-40 was 0.5 percent lower at 3,719.17.

Wall Street was set to fall. Dow futures were off 10 points, or 0.1 percent, at 10,770. Broader S&P futures slipped 1.6, or 0.1 percent, to 1,139.30.

Japan’s benchmark Nikkei 225 stock average lost 190.03 points, or 2 percent, to close at 9,369.35. Sentiment in Tokyo was also sluggish as Japan’s industrial production fell for the third straight month in August.

South Korea’s Kospi gained 0.3 percent to 1,872.81. Australia’s S&P/ASX 200 shed 1.3 percent to 4,582.9 and Hong Kong’s Hang Seng retreated 0.1 percent to 22,358.17.

Benchmarks in Singapore, India and Taiwan were down while Thailand, Shanghai and Jakarta were up.

Divisions within the Federal Reserve over how to pump up the U.S. economy — revealed by some Fed officials issuing differing views this week over how effective a fresh round of government-debt buying would be — kept some buyers at bay, analysts said.

“Because they (the Fed) are not making any firm commitments, we get the idea that they are still not very optimistic about the economic recovery,” said Lee Kok Joo, head of research at Phillip Securities in Singapore.

Given the jitters in Europe and the U.S., Lee said fund managers were opting to take profits or otherwise adjust their portfolios to limit losses ahead of a new round of economic indicators, including the U.S. revision of second-quarter gross domestic product.

Thursday’s drop in the Nikkei comes a day after game maker Nintendo slashed its earnings forecast by more than half after announcing its 3-D hand-held game machine, called 3DS, won’t be available in time for the Christmas shopping season. The company’s shares tumbled 9.3 percent Thursday.

The revision also shows Nintendo, which has stood up well among Japanese exporters, is getting battered by the rising yen. A stronger yen reduces profits from overseas sales when the income is brought back to Japan.

Concerns over Europe’s debt problems dampened sentiment on Wall Street on Wednesday with the Dow Jones industrial average falling 22.86 points, or 0.2 percent, to 10,835.28.

In currencies, the dollar fell to 83.23 yen from 83.78 yen. The euro rose to $1.3633 from $1.3622.

Benchmark crude for November delivery was up 4 cents at $77.90 a barrel in electronic trading on the New York Mercantile Exchange. The contract gained $1.20 to settle at $77.86 on Wednesday.

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