World stocks retreat amid thin data

[September 18, 2009]  LONDON (AP) -- European and Asian markets mostly fell Friday as a lack of new economic data left investors to book profits on the week's strong rally, which had brought many indexes to new highs for the year on hopes that the U.S. is emerging from recession.

Germany's DAX was down 0.2 percent at 5,720.40 and Britain's FTSE 100 was down 0.1 percent at 5,157.86. France's CAC-40 lost 0.3 percent to 3,825.52.

Asian markets closed mostly lower, while Wall Street was expected to dip on the open. Dow Jones industrials futures were down 26 points at 9,711.00 and Standard & Poor's 500 futures were down 2.30 points at 1,060.50.

Economic data has been better than expected this week, particularly in the U.S. -- the world's largest economy. That has supported the view expressed this week by Federal Reserve Chairman Ben Bernanke that the American recession is likely over and caused indexes around the world to rally.

A lack of major economic indicators on Friday, however, leaving traders "with little else to contemplate other than whether to take profits ahead of the weekend," said analysts at Calyon.

They warned that markets could become somewhat volatile due to an effect called "quadruple witching," in which four different types of options and futures expire, potentially causing stocks to whip about before the close.

In Europe, the only data of note was Britain's public finance figures, which showed the government borrowed another 16.1 billion pounds ($26.3 billion) during August -- a record for the month. The cost of bailout plans and lower tax revenues were the main culprits.

"With the main political parties now openly discussing plans to cut public spending more sharply than current plans allow, a severe fiscal squeeze is on the way which will necessitate the maintenance of very loose monetary policy for a prolonged period," said Jonathan Loynes, chief European economist at Capital Economics.

In Asia, Japan's Nikkei 225 stock average fell 0.7 percent to 10,370.54 as financial stocks took a hit after consumer lender Aiful Corp. said it will ask creditors to accept delays in repayment of $3.1 billion in debts. Consumer finance firms fund much of their high-interest lending to consumers by borrowing from banks and other institutions at lower rates.

Aiful shares slumped 27.2 percent while rival consumer financing firm Takefuji Corp. plunged 9.5 percent.

The jolt from Japan, which shows the financial sector remains shaky despite unprecedented government support, added to worries that markets have overestimated the strength of any economic recovery.

"The markets have shot up a lot and the prices are getting too high. We may have room for more gains but you have to be careful," said Linus Yip, a strategist at First Shanghai Securities in Hong Kong. "The economic fundamentals still aren't so good, and I think we may be getting near the last uptick in this rally."

Hong Kong's Hang Seng dropped 0.7 percent to 21,623.45 and China's Shanghai index lost 3.2 percent to 2,962.67. Australia's market shed 0.5 percent. Bucking the trend, South Korea's Kospi gained 0.3 percent to 1,699.71.

Wall Street lost ground on Thursday despite a surprise drop in unemployment claims.

The Dow Jones industrial average fell 0.1 percent after hitting a high for the year the day before. The S&P 500 index fell 0.3 percent and the Nasdaq composite index fell 0.3 percent.

Oil prices weakened, with the benchmark crude for October delivery fell 86 cents to $71.61 a barrel at late morning European time in electronic trading on the New York Mercantile Exchange. The contract fell 3 cents to settle at $72.47 on Thursday.

The dollar rose to 91.15 yen from 91.03 yen and the euro fell to $1.4680 from $1.4741.

[Associated Press; By CARLO PIOVANO]

AP Business Writers Stephen Wright in Bangkok and Jeremiah Marquez in Hong Kong contributed to this report.

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