World markets mixed on weak economy, earnings

[January 30, 2009]  LONDON (AP) -- European markets were mixed Friday, after sharp losses in Japan, amid more dismal economic numbers and quarterly reports from leading companies like Sony and Honda showing plunging profits.

In Europe, banking and mining stocks were stronger, but trading was subdued by news euro-zone unemployment edged up to 8 percent in December and by expectations U.S. GDP figures for the fourth quarter due later in the day will show the biggest drop in more than 25 years.

By noon in mainland Europe, Britain's FTSE 100 was up 0.21 percent. But Germany's DAX fell 0.39 percent and France's CAC 40 was down a similar 0.31 percent.

In London, mining giant Rio Tinto's shares rose 4.3 percent after it said it had struck a deal to sell an iron ore mine and other projects in South America to rival Vale for $1.6 billion.

Shares in banks Lloyds Banking Group, Royal Bank of Scotland and Barclays were up 7.1 percent, 6.2 percent and 5.4 percent. In Frankfurt, Commerzbank was up 5.8 percent and Deutsche Bank 1.4 percent.

"The banks for the time being are continuing to be supported by further banking initiatives by western governments and the U.S. bailout package which is slowly working its way through the legal system," said Keith Bowman, an analyst at Hargreaves Lansdown Stockbrokers in London. The U.S. plan involves "buying some of the toxic assets and ringfencing them in bad banks," he added.

Later Friday, the U.S. Commerce Department is set to release a report which analysts expect will show the economy shrank at an annualized pace of 5.4 percent in the October-December period, a much faster descent than the 0.5 percent decline logged in the prior quarter. If economists' forecasts are correct, it would mark the weakest quarterly showing since an annualized drop of 6.4 percent in the first quarter of 1982, when the country was suffering through a severe recession.

Investors also digested news from the European Union that an additional 230,000 people in the euro zone lost their jobs in December, reflecting a worsening economic situation across the 16-nation single currency area.

In Asia, Japan's Nikkei 225 stock average fell 257.19, or 3.1 percent, to 7,994.05 as investors reeled from a mounting pile of bad earnings reports and the latest economic data.

Industrial output at Japan's manufacturers plunged 9.6 percent from the previous month in December, the largest drop since Tokyo began measuring such data in 1953. The unemployment rate in the world's second-biggest economy jumped to 4.4 percent in December from 3.9 percent in November.

Honda Motor Corp. dived 9.2 percent ahead of quarterly results. The automaker's October-December profit, released after the market closed, tumbled 90 percent, hit by rising costs, a stronger yen and falling sales in key markets.

Megabank Mizuho Financial Group Inc., which had a quarterly loss of 50.55 billion yen ($559 million), slid 7.4 percent. Electronics giant Sony Corp., which Thursday reported a 95 plunge in October-December profit, sank 6.8 percent.

Toshiba Corp. tumbled 17.4 percent after forecasting a full year loss due to plummeting demand for its flash memory chips, used to store data in consumer gadgets like music players and digital cameras.

"Investors are looking for a magic bullet but there isn't one. There isn't one solution that by itself can solve all the complex problems that the world economy faces," said Arjuna Mahendran, head of Asian investment strategy at HSBC Private Bank in Singapore.

"In typical myopic fashion, markets are alternating between despair and hope," he said. "The problem is that there is no real visibility about earnings and the economic situation and there may not be until the second half of this year or very late in the year."

Hong Kong's key index clawed back early losses to rise 0.9 percent to 13,278.21 on speculation about an interest rate cut in mainland China or other stimulus measures.

"There are hopes for more stimulus measures because the authorities in China have said they are determined to stabilize the economy," said Castor Pang, an analyst at Sun Hung Kai Financial in Hong Kong.

India's Sensex rose 2 percent, South Korea's Kospi retreated 0.4 percent while markets in Singapore and the Philippines also lost ground. Australia's main index gained 0.4 percent. Markets in mainland China are closed all week for the Lunar New Year.

On Wall Street Thursday, the Dow Jones industrial index slid 2.7 percent Thursday to 8,149.01, while the S&P 500 index dropped 3.3 percent to 845.14.

Oil languished below $42 a barrel in Asia as more dismal U.S. economic numbers offset news that OPEC may further cut production. Light, sweet crude for March delivery rose 28 cents to $41.72 a barrel by noon in Europe in electronic trading on the New York Mercantile Exchange.

[Associated Press; By LOUISE WATT]

AP Business Writer Stephen Wright in Bangkok, Thailand, contributed to this report.

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