Stocks suffer as China seeks to overhaul industry

AP News
Posted: Jul 26, 2013 10:05 AM
Stocks suffer as China seeks to overhaul industry

LONDON (AP) — Stocks mostly dropped Friday on concerns that a brusque overhaul of China's industry could slow down the world's second-largest economy and after retailer reported a surprise loss.

Beijing has ordered companies to close factories in 19 industries where overproduction has led to price-cutting wars, affirming its determination to push ahead with a painful makeover of the economy. That move followed weak manufacturing data on Wednesday.

Communist leaders are trying to reduce reliance on investment and trade. But a slowdown that pushed China's economic growth to a two-decade low of 7.5 percent last quarter had earlier prompted suggestions they might have to reverse course and stimulate the economy with more investment to reduce the threat of job losses and unrest.

China's Shanghai Composite dropped 0.5 percent to 2,010.85.

In Europe, Britain's FTSE 100 index was down 0.5 percent to 6,557.49 while Germany's DAX fell 0.7 percent to 8,243.24.

France's CAC-40 bucked the trend, rising 0.3 percent to 3,969.76. It was boosted by a 4.1 percent rise in the shares of LVMH, the luxury goods maker, after it reported higher earnings. Meanwhile, shares in French media company Vivendi were up 2.6 percent after it agreed to sell most of its majority stake in video games maker Activision.

Wall Street opened lower as shares in fell 1.6 percent after the company reported a loss for the second quarter. The Nasdaq, on which the company is listed, fell 0.3 percent, while the broader S&P 500 was down 0.4 percent at 1,683.88. The Dow was 0.5 percent lower at 15,482.90.

Overall, trading has been quiet in recent days as a lot of people wait for next week's meeting of the Federal Open Market Committee in the U.S. for guidance on when the central bank will start reducing its monetary stimulus.

Since late last year, the Fed has been buying $85 billion in Treasury and mortgage bonds a month — a move that has kept long-term rates near record lows and supported economic recovery.

In Asia, Japan's Nikkei 225 index fared worst on Friday, closing 3 percent lower at 14,129.98, due to a big rise in the yen, which risks making the country's exports less competitive on international markets.

Japan on Friday said consumer prices rose in June for the first time in more than a year, an early sign that the government's stimulus policies are working. While that is a promising sign in the long-term, the signs of inflation suggest interest rates could eventually increase — higher rates tend to strengthen a national currency. The dollar was down 0.9 percent against the yen, at 98.34 yen.

Elsewhere in the region, Hong Kong's Hang Seng gained 0.3 percent and Australia's S&P/ASX 200 rose 0.1 percent.

In energy trading, benchmark crude was down 54 cents at $104.95 a barrel in electronic trading on the New York Mercantile Exchange.

The euro was little changed at $1.3273 from $1.3277 late Thursday.


Teresa Cerojano in Manila, Philippines, contributed to this report.