LONDON � European stock markets fell modestly Tuesday after disappointing economic data reinforced concerns about the recovery, while the Japanese yen struck a fresh 15-year high against the dollar as Japan's prime minister survived a leadership challenge.
In Europe, the FTSE 100 index was down 6.33 points, or 0.1 percent, at 5,559.20 while Germany's DAX fell 21.57 point,s or 0.3 percent, to 6,240.11. The CAC-40 in France was 8.7 points, or 0.2 percent, lower at 3,758.45.
Evidence of a faltering economic recovery in Europe came thick and fast Tuesday.
Figures from the Royal Institution of Chartered Surveyors indicated that house prices in Britain fell sharply in August even though separate figures from the statistics office showed inflation at 3.1 percent in the year to August, more than anticipated and still way above the Bank of England's target of 2 percent.
Meanwhile, figures from Eurostat, the EU's statistics office showed industrial production for the 16 countries that use the euro was flat in July, against expectations for a modest increase, while the closely watched ZEW survey of German investor sentiment was much weaker than expected.
The fall in ZEW's headline expectations indicator dropped from 14 in August to minus 4.3 in September. That was the first negative since March 2009 and provided further evidence that the big economic rebound in Germany during the second quarter has come to an end.
"The drop in ZEW economic sentiment in September and July's stagnation in eurozone industrial production confirm that the eurozone recovery is slowing again after Q2's strong expansion," said Jennifer McKeown, senior European economist at Capital Economics.
The euro was down 0.3 percent at $1.2838 in the aftermath of the data.
Concerns about the economic recovery have dominated markets over the past few weeks, but mainly it's been worries over the U.S. economy following a run of disappointing data there. However, recent figures out of the U.S. have indicated that the previous pessimism may have been overdone.
After a couple of months of disappointing U.S. economic data, there's been a bit of a turnaround in the past couple of weeks, which has helped to shore up sentiment and allowed stocks to rally.
The main focus in the markets later will be the release of U.S. retail sales data for August. They are particularly important because U.S. consumer spending accounts for around 70 percent of the world's largest economy.
Investors will be looking to see if the growing talk of a double-dip recession reined in consumption � the consensus in the markets is that retails sales rose 0.3 percent in August.
Ben Potter, market strategist at IG Index, warned that a bout of profit-taking may not be long in coming following recent solid stock market gains and said the retail sales "could be the catalyst."
Before the open, U.S. shares were expected to drop modestly following Monday's solid advance. Dow futures were down 20 points, or 0.2 percent, at 10,452 and the broader Standard & Poor's 500 futures were 2.7 points, or 0.2 percent, lower at 1,113.50.
Earlier in Asia, the main focus was on the vote for the reelection of Prime Minister Naoto Kan as leader of the Democratic Party. His reelection has yet to be gauged in the stock markets as the result came after the Japan's Nikkei closed 0.2 percent lower at 9,299.31 points.
The victory means Kan, who has been in office three months, will remain in power, providing some continuity for a country that has seen five leadership changes in the past four years, and is dealing with a surging currency and a spat with China over disputed islands.
The dollar touched 83.09 yen, its second 15-year low of the day, after the result was announced before recovering slightly to 83.32 yen in late London trading.
Both Kan and Ozawa have made comments hinting at possible intervention, though Ozawa's were seen as stronger in tone.
"Investors were speculating that if Ozawa won, Japan would intervene to boost the dollar," said Yu Yokoi, a foreign exchange dealer at Mizuho Bank. "But Ozawa lost, and investors quickly reacted to it as the scenario of dollar-supporting intervention is less likely."
China's currency, meanwhile, hit a new high against the dollar for the third straight day as U.S. lawmakers prepared for hearings on Beijing's foreign exchange policies.
China's central bank set the yuan-dollar rate at 6.7378 on Tuesday, after putting it at 6.7509 on Monday and 6.7625 on Friday. The yuan closed at 6.7618 on Monday.
By late morning London time, the yuan was trading at 6.7455 to the dollar, after hitting a low of 6.7446.
Shanghai's benchmark stock index eked out a marginal increase of less than 0.1 percent to 2,688.52.
Oil prices shed some recent gains, with benchmark crude for October delivery down 55 cents at $76.64 a barrel in electronic trading on the New York Mercantile Exchange.
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AP Business Writer Kelly Olsen in Seoul, South Korea contributed to this report.
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