European, US stocks down amid recovery caution (AP)
Fri, 12 Jun 2009 16:06:14 Etc/GM
In midday trading in New York, the Dow Jones industrial average was down 0.2 percent to 8,750.28 and the broader Standard & Poor's 500 index fell 0.6 percent to 939.23.
Germany's DAX closed 0.7 percent lower at 5,069.24, while the CAC-40 in France lost 0.4 percent at 3,326.14. The FTSE 100 index of leading British shares was down 0.5 percent at 4,441.95, with Barclays PLC falling 4 percent after it confirmed the sale of its global investment unit to U.S. fund manager BlackRock Inc. for $13.5 billion.
"This was, of course, far from being a surprise, and the weakness seen in the share price of Barclays is a reflection of investors taking money off the table when it comes to the banking sector in general," said David Jones, chief market strategist at IG Index.
In Europe, stocks fell after the European Union's statistics office Eurostat revealed that industrial production in the 16 countries that use the euro slumped by 1.9 percent in April from the previous month. That was more than the 1 percent decline expected in the markets and stoked worries that the recession in the euro zone may not yet have bottomed out, as some had hoped.
Industrial production plays a particularly important role in the European economy and its recovery, whenever it comes, will provide a clear indication that the worst of the recession is over.
Sharply lower industrial output was blamed for the massive 2.5 percent quarterly fall in the euro zone's first quarter gross domestic product. The recession in Germany, the euro zone's biggest economy, was even greater as demand for its high-value exports, such as cars and heavy machinery, slumped amid the collapse in global trade.
Following three months of gains, the markets have recently traded in narrow ranges.
"While the market is hesitating -- being optimistic because the worst seems to be over, but remaining cautious because the near future is uncertain -- diagnoses proposed by the main central banks suggest that a sustainable recovery will not take place soon," said Herve Goulletquer, an analyst at Calyon Credit Agricole.
Stock markets have rallied since mid-March as investors priced in the possibility of a swifter than anticipated global economic rebound. As equities usually start rising 6 to 9 months before actual recovery emerges in the official economic data, this suggests investors believe the massive sell-off in markets during the most acute phase of the financial crisis was overdone. Some of the world's major equity indexes are now in positive territory for 2009.
Nevertheless, many investors are beginning to worry that higher oil prices and bond yields could limit the extent of an economic recovery, especially if they hit U.S. consumption. Without the support of the U.S. consumer, which accounts for around 70 percent of the U.S. economy and 20 percent of the global economy, any recovery will soon fizzle out.
Figures Friday showed little evidence of a marked improvement in U.S. consumer confidence. The University of Michigan said its consumer sentiment index increased only modestly in June, to 69 from May's 68.7.
Earlier, Asian markets rose after some more encouraging Chinese economic data.
The government said retail sales and industrial output grew strongly in May amid heavy stimulus spending. That followed figures showing domestic investment in factories, real estate and other fixed assets soared 32.9 percent in the first five months of the year, even as exports and imports tumbled in May.
Beijing is trying to shield the Chinese economy from the plunge in demand from Western consumers by injecting money into the economy through heavy spending on construction projects -- and so far that seems to be working.
Japan's Nikkei average closed up 154.49 points, or 1.6 percent, to 10,135.82, the highest since Oct. 7. For the week, it climbed 3.8 percent. Hong Kong's Hang Seng index added 98.65 points, or 0.5 percent, to 18,889.68. Australia's key index gained 0.4 percent to 4,062.2, while South Korea's Kospi climbed 0.7 percent to 1,428.59.
Mainland China's Shanghai's Composite index -- which has surged more than 40 percent this year -- fell 1.9 percent to 2,743.76.
Oil prices fell back after hitting an eight-month high Thursday. Benchmark crude for July delivery slipped 65 cents to $72.03 a barrel in electronic trading on the New York Mercantile Exchange.
AP business writers Pan Pylas in London and Malcolm Foster in Bangkok contributed to this report.
source: http://biz.yahoo.com/ap/090612/world_markets.html?.v=5