World stocks mixed amid higher commodity prices, strong data out of China

By Pamela Sampson, AP
Monday, October 4, 2010

World stocks mixed amid higher commodity prices

BANGKOK — World stock markets were mixed Monday, with European shares failing to enjoy the boost that Asia received from higher commodity prices and stronger Chinese manufacturing growth.

Oil hovered above $81 a barrel in Asia after a big gain Friday on renewed hopes that demand for crude will improve. The dollar was up against the yen and the euro.

European shares headed lower in early trading. London’s FTSE of 100 leading shares was down 0.5 percent to 5,564.16. Germany’s DAX was down by 0.9 percent to 6,155.63 and the CAC-40 in Paris was lower by 1.1 percent to 3,652.02.

Wall Street also looked set to open in the red with Dow futures down by 43 points, or 0.4 percent, to 10,725.

Meanwhile, a strong yen continued to weigh on Japanese stocks. The Nikkei 225 stock average closed off 23.17 points, or 0.3 percent, to 9,381.06.

Elsewhere in Asia, however, markets got a boost from news Friday that Chinese manufacturing picked up pace in September, adding to evidence that China’s economic recovery remains on track and giving traders in Asia the courage to plunge into stocks.

The state-affiliated China Federation of Logistics and Purchasing said its purchasing managers index, or PMI, rose by about 2 points in September.

“The PMI rose higher than expected. That is the driving force for the rise in Asia,” said Francis Lun, general manager of Fulbright Securities Ltd. in Hong Kong.

Hong Kong’s Hang Seng index jumped 1.2 percent to 22,618.66, with particular strength seen in the property sector. South Korea’s Kospi rose 0.1 percent to 1,879.29 and Australia’s S&P/ASX 200 added 1 percent to 4,625.30.

Financial markets in mainland China are closed through Oct. 7 for the National Day holidays.

Another profound influence on the market, Lun said, is the weakening dollar, which hit a six-month low against the euro Friday. The struggling greenback is causing traders to flee to commodities — causing gold and oil to rise — and to alternative currencies like the Australian dollar.

Meanwhile, the prospect that the Federal Reserve may take further action to stimulate the U.S. economy — a move likely to lower long-term interest rates — helped push up prices of Hong Kong’s property stocks, Lun said, as the sector will offer better returns than U.S. government debt.

Many economists predict the Fed will move to buy more government securities — perhaps as soon as its next meeting on Nov. 2-3. The Fed is weighing that option, known as quantitative easing, because its traditional interest-rate lever to help the economy is already at a record low near zero and can’t be cut further.

Investors were also awaiting policy decisions from central banks in Japan and Australia. The Bank of Japan began a two-day policy meeting Monday, the outcome of which is expected to be new steps to ease monetary policy amid a fragile economic recovery.

Australian banks advanced amid speculation that the Reserve Bank of Australia would raise interest rates on Tuesday, while higher commodity prices sent resource stocks higher across the region.

Japan’s JX Holdings Inc. rose 1.2 percent and South Korea’s SK Energy Co. advanced 3.1 percent.

In the U.S. on Friday, the Dow Jones industrial average rose 41.63, or 0.4 percent, to close at 10,829.68. The Standard & Poor’s 500 index rose 5.04, or 0.4 percent, to 1,146.24. The Nasdaq composite rose 2.13, or 0.1 percent, to 2,370.75.

In currencies, the dollar rose to 83.24 yen from 83.19 yen. The euro fell to $1.3707 from $1.3789.

Benchmark oil for November delivery was lower by 45 cents to $81.13 a barrel in electronic trading on the New York Mercantile Exchange. The contract gained $1.61 to settle at $81.58 on Friday, the first time it topped $80 a barrel since early August.

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