World markets mostly higher as Chinese manufacturing picks up pace but US growth slows

By Carlo Piovano, AP
Friday, October 1, 2010

World stocks mostly higher on recovery hopes

LONDON — World stock markets mostly rose Friday after economic data from the U.S. and China suggested the global recovery will continue, although at a moderate pace.

A manufacturing survey out of China was surprisingly strong, while the U.S. equivalent showed the sector there was still growing in September but at a slower clip. Other data, such as an unexpectedly large rise in U.S. personal income and spending in August, helped eased fears of a sharp slowdown in the world economy.

After gains in Asia, Europe’s indexes were mixed. Britain’s FTSE 100 closed up 0.6 percent at 5,581.26 while Germany’s DAX was 0.3 percent lower at 6,211.34. France’s CAC-40 was down 0.7 percent at 3,688.40.

Wall Street rose after chalking up its best September in 71 years. The Dow was up 0.2 percent to 10,805.54 while the Standard & Poor’s 500 was 0.1 percent higher at 1,142.48.

The U.S. manufacturing report showing slower but continued growth dampened some of the market optimism generated by a much stronger survey from China.

Europe’s own purchasing managers’ index, a gauge of business activity, also showed manufacturing activity eased there in September. The unemployment rate for the 16-nation eurozone, meanwhile, remained above 10 percent in August, suggesting the labor market will be slow to benefit from any economic recovery.

Europe’s difficult economic outlook was underscored this week after Ireland revealed it would be forced to invest another €12 billion ($16 billion) into its crippled banking system and Spain’s public debt rating was downgraded.

Investors took the news in stride, however, and in fact welcomed Ireland’s move to detail the cost of its bank bailouts — and its promise not to default — as a helpful act of transparency. Despite the worrying headline news, borrowing costs for debt-laden countries like Ireland, Spain and Portugal actually fell.

Meanwhile, shares in BP soared over 9 percent on Friday on the first day the company switched CEO — outgoing Tony Hayward was replaced by Bob Dudley, who sounded a positive note on the transformation forced on the company by the devastating Gulf of Mexico oil spill. He promised a leaner company and further assets sales.

In Spain, oil company Repsol saw its shares jump more than 5 percent after it announced that China’s Sinopec would buy a stake in the Spanish company’s Brazilian unit for $7.1 billion.

Economic indicators from the U.S. the previous day also helped sentiment. Chicago area manufacturing jumped in September, first-time claims for unemployment benefits fell more than expected last week, and second-quarter economic growth was revised slightly higher.

In Asia, Japan’s benchmark Nikkei 225 stock average climbed 34.88, or 0.4 percent, to 9,404.23. The index held firm after the government said Japan’s jobless rate improved in August, falling to 5.1 percent from 5.2 percent in July and marking the second straight month of decline.

South Korea’s Kospi added 0.2 percent while Australia’s S&P/ASX 200 slipped 0.1 percent.

Stocks markets in Hong Kong and China were closed for public holidays. Mainland Chinese markets will reopen on Oct. 8. Elsewhere, markets in Taiwan, India, Malaysia, Singapore and Indonesia all advanced.

Asian central banks will likely intervene in coming weeks to slow the rate of currency appreciation but a big push to weaken currencies outright is unlikely, Capital Economics said in a report. “We continue to expect that regional currencies and emerging Asia equity markets will eventually climb further.”

In currencies, the dollar fell to 83.29 yen from 83.51 yen late Thursday in New York. The euro rose to $1.3759, near fresh five-month highs, from $1.3623.

Benchmark oil for November delivery rose 81 cents to $83.12 a barrel in electronic trading on the New York Mercantile Exchange. The contract rose $2.11 to settle at $79.97 a barrel on Thursday.

Associated Press writer Alex Kennedy in Singapore contributed to this report.

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