European markets steady as Asia slips

[August 27, 2009]  LONDON (AP) -- European stocks held steady Thursday despite losses in Asia, as investors brushed off a string of upbeat economic figures on fears any recovery may not prove sustainable.

In European morning trade, Germany's DAX was down 3.45 points, or 0.1 percent, at 5,518.52, while Britain's FTSE 100 was up 2.34 points, or 0.1 percent, at 4,892.92. France's CAC-40 edged up 3.32 points, or 0.1 percent, to 3.671.66.

Most Asian stock indexes closed lower after China said it will curb overcapacity and excessive investment in industries such as steel and cement, adding to worries about the country's economic recovery.

Meager gains overnight on Wall Street also contributed to the increasingly cautious mood among investors after the strong rally in world markets since March. While economic indicators are turning consistently positive, investors wonder if further gains in stock prices are warranted.

"Another day of strong data releases and the markets hardly flinched," said Mitul Kotecha, analyst at Calyon.

"There have been plenty of positive data surprises over recent weeks and markets have become increasingly desensitised to such news," he said.

In Germany, the Nuremberg-based GfK research group said its forward-looking Consumer Climate Survey rose to 3.7 points for September from 3.4 points the previous month as more people reported expectations of an economic recovery.

That came on the back of another increase in a separate measure of business confidence, in Ifo survey, on Wednesday.

Earnings reports, meanwhile showed some improvements. Diageo Plc, the world's biggest spirits maker, posted a 7 percent rise in full-year net profit, although its shares fell 3.3 percent on worries about weaker revenue. France's Credit Agricole SA saw its shares jump 5.6 percent after reporting its net profit more than doubled in the second quarter.

In the U.S., positive economic signals also abounded, with durable goods orders and new home sales both showing increases Wednesday. The weekly U.S. jobless report will be published later Thursday, as will a revision to second quarter GDP data, which will give investors more clues about the direction of the economy there.

But analysts note that markets are reacting very little to this steady stream of upbeat data, so even a surprise upward revision to U.S. growth data may fail to give markets momentum.

On Wednesday, the Dow Jones industrials rose by a mild 0.04 percent to 9,543.52, while the broader Standard & Poor's 500 index rose only 0.01 percent, to 1,028.12.

Wall Street futures suggested a weak opening Thursday in New York. Dow futures were up 12 points, or 0.2 percent, to 9,538.00, while S&P futures rose 0.9 points, or 0.1 percent, to 1,027.70.

Kotecha put it down to "market fatigue," with investors already having priced in a mild recovery.

Markets have yet to be convinced that any economic rebound will be lasting, doubts fueled by fueled by concerns over growth in China.

Wednesday's announcement that Beijing plans to cut capacity in steel and other sectors comes after economists had warned that China's 4 trillion yuan ($586 billion) stimulus package was creating a glut in a range of industries. In the long run, that may be positive for the Chinese economy, but in the short-term could mean less profit.

"They pumped trillions (of yuan) into the economy and the local economic leaders used the money to build steel mills that have no market," said Francis Lun, general manager of Fulbright Securities Ltd. in Hong Kong. "This is bad for the stock market."

"We'll probably see a temporary lull," he said. "In Hong Kong, people are ready to sell out because the market has risen so much this summer."

Hong Kong's Hang Seng index declined 213.57 points, or 1 percent, to 20,242.75, while Tokyo's Nikkei 225 average slid 165.74 points, or 1.6 percent, to 10,473.97.

Shanghai's Composite index, which has swung wildly over the last two weeks, dropped a relatively moderate 0.7 percent to 2,946.40.

South Korea's Kospi fell 0.9 percent and Australia's benchmark ended down 0.1 percent, but markets in Singapore, India and the Philippines advanced.

Crude oil prices edged down, with benchmark crude for October delivery down 31 cents to $71.12 a barrel.

In currencies, the dollar weakened further to 93.64 yen from 94.21 yen late Wednesday in New York. The euro was little changed at $1.4258.

[Associated Press; By CARLO PIOVANO]

Associated Press writer Malcolm Foster in Bangkok contributed to this report.

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