Markets temper enthusiasm after Japan stimulus

AP News
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Posted: Jan 11, 2013 7:46 AM
Markets temper enthusiasm after Japan stimulus

PARIS (AP) — A massive spending package meant to reinvigorate Japan's economy briefly boosted world markets Friday, but new figures showing a rise in Chinese inflation quickly brought most stocks back down.

Japan's Nikkei stock index soared after Japanese Prime Minister Shinzo Abe announced an anti-recession stimulus package of more than 20 trillion yen ($224 billion) that is intended to add 2 percentage points to Japan's growth.

The news also lifted other markets, but by midday in Europe, investors were tempering their enthusiasm on evidence that price increases were accelerating in China, the world's second-largest economy. The inflation rate rose to 2.5 percent in December from 2 percent the previous month, due partly to a jump in food prices.

"The rise is disappointing as traders were hoping that policy officials may introduce new measures to help stimulate the Chinese economy," said Shavaz Dhalla, a trader with Spreadex. "Cleary rising prices could act as a barrier for officials as there is now the fear that more stimulus measures could cause the current inflation figures to rocket."

European countries are also facing their own uphill battle to restore economic growth. The economy of the 17 European Union nations that use the euro is in recession, and unemployment is soaring across the region.

In France, the CAC-40 fell 0.2 percent to 3,695, while Germany's DAX edged up 0.1 percent to 7,719. The FTSE index of leading British shares rose 0.2 percent at 6,111.

Wall Street was set to open relatively flat. Dow Jones futures were trading down 0.1 percent at 13,398, while S&P futures were even at 1,467.

Earlier in the day, the Nikkei closed 1.4 percent higher at 10,801.57.

But not all Asian markets rallied, hemmed in by concerns about inflation in China. Hong Kong's Hang Seng fell 0.4 percent to 23,264.07. South Korea's Kospi lost 0.5 percent to 1,996.67. Australia's S&P/ASX 200 shed 0.3 percent to 4,709.50. Benchmarks in Singapore and mainland China also fell while those in the Philippines and New Zealand rose.

Amid persistent concerns about the health of the world economy, energy prices fell.

Benchmark oil for February delivery was down 55 cents to $93.27 per barrel in electronic trading on the New York Mercantile Exchange.

The euro pulled back to $1.3253 after its jump Thursday following the European Central Bank's decision to leave its interest rate at the record low of 0.75 percent. In a press conference, ECB President Mario Draghi said the eurozone economy should start to grow again later this year.

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Pamela Sampson contributed to this report from Bangkok.