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European stocks higher on expected Dow rebound

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[December 23, 2008]  LONDON (AP) -- European stock markets rose modestly Tuesday in very light pre-Christmas trade ahead of an expected rebound on Wall Street, while Asian markets continued to fall in the wake of Toyota's second profits warning in just two months.

HardwareThe FTSE 100 index of leading British shares was 40.63 points, or 1.0 percent, higher at 4,289.79 despite news that the British economy contracted by a bigger than anticipated 0.6 percent in the July-September quarter from the previous three month period. The figure updates the original extimate of 0.5 percent.

Meanwhile, Germany's DAX was 22.07 points, or 0.5 percent, higher at 4,661.09 and the CAC-40 in France was up 20.43 points, or 0.7 percent, at 3,171.79.

"Given the time of year and the proximity of the holidays and the New Year, liquidity will remain as thin as a wafer-thin mint, with only those who have to trade likely to be prepared to dip their toes in the volatile waters that the market has become," said Stuart Bennett, an analyst at Calyon Credit Agricole.

Earlier, Asian stock markets fell as an interest rate cut in China disappointed investors and Toyota Motor Corp.'s profit warning from Monday raised concerns about the scale of the global slump.

Investors were unimpressed by 0.27 percentage point cut on the benchmark one-year lending rate to 2.25 percent, its lowest level since February 2004. Many had expected a half-point cut, analysts said. It was the fifth cut in four months as Beijing rushes to revive economic growth.


South Korea's Kospi retreated 35.3 points, or 3 percent ,to 1,144.31, Singapore's benchmark lost 1.2 percent and Australia's key index fell 0.7 percent. Japan's market was closed for a national holiday.

In China, Hong Kong's Hang Seng Index dropped 2.8 percent to 14,220.79 while Shanghai's main index plummeted 4.6 percent to 1,897.22 as both markets came under pressure after Beijing lowered a key interest rate late Monday.

Japan's market was closed for a public holiday.

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Wall Street was poised for a solid opening Tuesday, having ended Monday down following the dismal news from Toyota and U.S. drugstore operator Walgreen Co. The Dow Jones industrial average ended 59.34 points, or 0.69 percent, lower at 8,519.77 -- its fourth straight daily loss. The broader Standard & Poor's 500 index fell 16.25, or 1.83 percent, to 871.63.

Some of those losses were expected to be recouped later as Dow futures were up 23 points at 8,562, while S&P futures rose 4.7 points, or 0.5 percent, to 876.

Though global equities have made gains in three of the last four weeks following the preceding crash, analysts remain wary amid the mounting economic gloom around the world.

Oil prices edged lower on concerns that energy demand was falling off a cliff due to the slowing economy. Light, sweet crude for February delivery dipped 4 cents to $39.87 a barrel in electronic trading on the New York Mercantile Exchange.

In currencies, the dollar fell 0.1 percent to 90.10 yen while the euro was 0.2 percent higher at $1.3964.

[Associated Press; By PAN PYLAS]

AP Business Writer Jeremiah Marquez in Hong Kong contributed to this report.

Copyright 2008 The Associated Press. All rights reserved. This material may not be published, broadcast, rewritten or redistributed.


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