World stock markets mixed in tight ranges

[December 17, 2010]  SEOUL, South Korea (AP) -- World stock markets moved in tight ranges Friday amid encouraging news about the U.S. economy and indications Chinese policymakers are reluctant to raise interest rates.

Government reports this week in the United States on layoffs, factory production and consumer spending as well as a tax cut plan poised for approval by lawmakers are spurring economists to predict hiring and housing in the world's largest economy will gain strength in 2011.

China, meanwhile, is trying to control its fast-growing economy and douse rising inflation, which has led to speculation it may follow a recent increase in bank reserve requirements with another interest rate hike.

"Although I cannot say that a reserve requirement ratio increase might mean no interest rate rise, the central bank will not use both tools at the same time," Zhou Xiaochuan, governor of the People's Bank of China, said in a speech Thursday at Peking University, Hong Kong's South China Morning Post reported Friday.

"The news is that the central bank really doesn't want to raise (the) interest rate," said Francis Lun, general manager of Fulbright Securities in Hong Kong.

The comments, however, weren't enough to boost stocks in Shanghai, where worries about a possible rate rise remained a factor.

The Shanghai Composite index fell 0.2 percent to 2,893.74.

"Investors remained optimistic, but also pretty cautious, especially when the possibility of another rise in interest rates within 2010 is still large," said Peng Yunliang, an analyst at Shanghai Securities.

Hong Kong's Hang Seng index recovered from earlier losses to eke out a rise of 0.2 percent to 22,714.85.

Japan's Nikkei 225 stock average declined 0.1 percent to 10,303.83 amid concerns the market may have risen too far recently. The Nikkei has gained about 5 percent over the last month.

In Europe, stocks opened slightly higher.

The FTSE 100 index of leading British shares rose 0.1 percent, to 5,885.61. France's CAC-40 gained 0.3 percent to 3,901.30. Germany's DAX rose 0.1 percent, to 7,030.11.

Wall Street was set to open marginally higher. Dow futures were up a fraction to 11,434. Broader S&P futures rose 0.1 percent, to 1,239.20.

Back in the Asia-Pacific, Australia's S&P/ASX dropped 0.3 percent to 4,853, while Thai stocks declined 0.7 percent to 1,022.96. But South Korea's Kospi rose 0.9 percent to 2,026.30 to remain at a three-year high. Benchmarks in Taiwan, Singapore, New Zealand, the Philippines and Indonesia also advanced.

In New York Thursday, a small drop in unemployment claims helped push stocks higher. The Dow Jones industrial average and the Standard & Poor's 500 index closed at their highest levels of the year. The Labor Department said first-time claims for unemployment benefits fell last week to 420,000, the third drop in four weeks.

The Dow Jones industrial average rose 41.78, or 0.4 percent, to 11,499.25. The broader Standard & Poor's 500 index rose 7.64, or 0.6 percent, to 1,242.87. The Nasdaq composite rose 20.09, or 0.8, to 2,637.31.

In currencies, the dollar fell to 83.76 yen from 83.92 yen late Thursday. The euro rose to $1.3348 from $1.3243.

Benchmark oil for January delivery was up 36 cents at $88.06 a barrel in electronic trading on the New York Mercantile Exchange. The contract lost 92 cents to settle at $87.70 on Thursday.

[Associated Press; By KELLY OLSEN]

Associated Press Business Writer Kelvin Chan in Hong Kong, AP writer Tomoko A. Hosaka in Tokyo and AP researcher Ji Chen in Shanghai contributed to this report.

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