World stocks slip as dollar drop hits exporters

[September 09, 2009]  LONDON (AP) -- European and Asian stocks drifted lower Wednesday as a drop in the value of the dollar hit world exporters, pushing investors to cash in on this week's rally.

The U.S. dollar was hovering near lows for the year against the euro and a two-month low against the yen after sinking Tuesday. That helped oil prices jumped more than $3 a barrel overnight.

The dollar's fall also helped gold kept its nose above $1,000 an ounce after it rose above that mark the previous day for the first time since February.

Following a string of gains triggered by big merger announcements and a pledge by the Group of 20 rich and developing countries to maintain stimulus efforts, investors looked eager to cash in on this week's gains.

Germany's DAX fell 0.3 percent, to 5,467.49 and Britain's FTSE 100 lost 0.3 percent, to 4,934.78. France's CAC-40 shed 0.3 percent, to 3,650.63. Sentiment was no better on Wall Street, where stock futures pointed to losses at the open. Dow futures fell 0.5 percent to 9,452.00 and S&P futures slipped 0.3 percent, to 1,022.50.

Asian indexes also dropped, as its export-heavy economies -- like those in Europe -- suffered from the weaker dollar, which makes it harder for them to sell in the U.S.

The dollar recovered only some of its previous day's losses against the yen edging up to 92.51 yen from 92.26 yen late Tuesday. The euro, meanwhile, continued to rise, to $1.4497 from $1.4488 after Tuesday hitting $1.4535, its highest level this year.

The dollar -- a typical safe haven -- has been hurt by a rise in stock markets and a general improvement in investors' risk appetite after world governments said they would continue to support the global recovery and corporate merger activity picked up.

Still, analysts are not sure how far the dollar can fall, particularly since doubts still linger about the strength of recovery in world economies.

"It has been said that it is better to be mad with the rest of the world than wise alone. This is certainly relevant to foreign exchange markets at the moment," said Daragh Maher, analyst at Calyon.

"The truly level-headed will be booking profits early and constantly reassessing," he said.

The weaker dollar has had the added effect of causing commodity prices like oil and gold to jump higher.

Benchmark crude oil for October delivery gained $3.08 overnight and was up 3 cents to $71.13 a barrel by late morning European time in electronic trading on the New York Mercantile Exchange.

Oil traders were watching closely an OPEC meeting in Vienna, although oil ministers have repeatedly said that the producer group is unlikely to change its production levels.

Saudi Oil Minister Ali Naimi, whose country is OPEC's top producer and most influential member, said Tuesday that crude's current price "is good for everybody: consumers and producers."

Gold has likewise shot higher, rising above the $1,000 per ounce mark Tuesday for the first time since February and trading at $999.00 per ounce, down $0.80, on the New York Mercantile Exchange on Wednesday.

Peter Lai, investment manager at DBS Vickers in Hong Kong, said gold is likely to continue to rise if the dollar weakens any further, as that would make the precious metal more affordable in other countries.

In Asia, the Nikkei 225 stock average closed down 81.09 points, or 0.8 percent, at 10,312.14, while South Korea's Kospi retreated 0.7 percent to 1,607.77.

Automakers and other exporters got hit hardest. Toyota Motor Corp., the world's biggest carmaker, was down 1.8 percent and electronics giant Sony dropped 2.2 percent. Hyundai Motor Co. shed 5.8 percent in Seoul.

In Hong Kong, the Hang Seng declined 218.77, or 1 percent, to 20,851.04. China's benchmark Shanghai index recovered losses to gain 15.78, or 0.5 percent, to 2,946.26, while Australia's main index closed marginally lower.

The Dow Jones industrial average rose 56.07, or 0.6 percent, to 9,497.34 on Tuesday. The broader Standard & Poor's 500 index rose 8.99, or 0.9 percent, to 1,025.39, and the Nasdaq composite index rose 18.99, or 0.9 percent, to 2,037.77.

[Associated Press; By CARLO PIOVANO]

Associated Press writer Stephen Wright in Bangkok contributed to this report.

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