World markets cautious amid dull economic signs

AP News
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Posted: May 30, 2011 5:23 AM
World markets cautious amid dull economic signs

World stock markets drifted Monday amid a quiet day of trading due to a U.S. holiday and signs that the global economic recovery has hit a plateau.

Oil prices hovered below $100 a barrel in light trading volume ahead of the U.S. Memorial Day holiday. The dollar was down against the euro but up against the yen.

Asian markets were largely inert and European shares posted muted gains in early trading. Germany's DAX was 0.4 percent higher to 7,190.4 and France's CAC-40 rose 0.1 percent to 3,955.97.Markets in Britain are closed for a holiday.

While most major economies are expected to keep growing, evidence is mounting that many around the world are struggling to expand as fast as they did last year. European governments are struggling with debts and squeezed budgets. High unemployment, depressed real estate and still-high oil prices are slowing the U.S. economy. In China, interest-rate hikes designed to reduce inflation are slowing growth.

"In this kind of market, where you have seasonal weakness, not to mention a raft of concerns comprising softening global economic data and European, US debt worries, the markets' default position is definitely down," Cameron Peacock, a market analyst with IG Markets in Melbourne, said in a report.

Japan's Nikkei 225 stock average slipped 0.2 percent to close at 9,504.97 as a stronger yen hurt the country's exporters. Many of them are already struggling with power outages and parts shortages in the aftermath of a devastating earthquake and tsunami on March 11.

Toyota Motor Corp., the world's top auto producer, was down 0.2 percent and rival Honda Motor Co. Ltd. lost 1.3 percent. Electronics and entertainment giant Sony Corp. slid 2.1 percent.

South Korea's Kospi lost 0.3 percent to 2,093.79, with tech shares among the most embattled. Samsung SDI Co. Ltd., which manufactures electron tubes and plasma panels for digital displays, plummeted 11.5 percent.

Samsung Electronics Co. and Hynix Semiconductor Inc., the world's two largest makers of computer memory chips, fell 0.8 percent and 5.8 percent respectively amid reports showing decreasing demand for personal computers.

A report by Taiwan-based DRAMeXchange Technology Inc., showed Samsung accounted for about 40 percent of the global DRAM market in the January-March period, according to Yonhap News agency. The DRAM chips run multiple programs simultaneously on personal computers. But the size of the worldwide DRAM market in the first quarter was down 3.7 percent from three months earlier, as demand for PCs remains weak, the DRAM report said.

Australia's S&P/ASX 200 shed 0.4 percent to 4,667.50, as banking shares came under pressure amid speculation they are becoming attractive to short sellers due in part to exposure to Australia's property market, analysts said. Short sellers sell stocks they've borrowed from other investors in the expectation they'll make a profit when the share price falls.

"Banks are exposed to property prices. If they stagnate or soften, there is potential liability for banks there," said Matthew Lewis, head of sales trading at CMC Markets in Sydney.

Commonwealth Bank of Australia and Westpac Banking Corp. both dropped 1.3 percent. National Australia Bank Ltd. was down 0.8 percent.

Hong Kong's Hang Sang was up 0.3 percent to 23,184.32. Benchmarks in Singapore, Taiwan, New Zealand, Thailand and the Philippines also rose.

Mainland Chinese shares edged lower on speculation authorities may be preparing to raise interest rates again soon to counter inflation.

The benchmark Shanghai Composite Index lost 0.1 percent to 2,706.36, after gaining 0.7 percent earlier in the day. The Shenzhen Composite Index of China's smaller, second exchange lost 1 percent to 1,090.50.

In the U.S., a key measure of consumer confidence rose unexpectedly this month, helping to boost Wall Street on Friday.

The Thomson Reuters/University of Michigan Consumer Sentiment index rose to 74.3 in May, above analysts' estimates of 70. Concerns about higher gas prices and inflation knocked the gauge down in March and April.

Gas prices have come down in May after reaching nearly $4 last month, giving a lift to the closely watched measure of how people feel about the economy. That raised hopes that people might be willing to spend more.

The Dow Jones industrial average rose 0.3 percent to 12,441.58. The Standard & Poor's 500 index rose 0.4 percent to 1,331.10. The Nasdaq composite rose 0.5 percent to 2,796.86. U.S. markets are closed Monday for Memorial Day.

Benchmark oil for July delivery was down 70 cents to $99.89 a barrel in electronic trading on the New York Mercantile Exchange. The benchmark contract added 36 cents to settle at $100.59 on Friday.

The euro was up against the dollar at $1.4288 from $1.4283 Friday in New York. The dollar weakened to 80.81 yen from 80.91 yen.