China leads global markets lower in holiday trade

[December 24, 2010]  LONDON (AP) -- Chinese stocks led global markets lower Friday after officials announced plans to sharply limit new vehicle registrations in traffic-congested Beijing, while another downgrade of Portugal's credit rating kept sentiment in check in those European markets that were open.

Trading generally was light with many markets, including Wall Street, closed for Christmas.

In Europe, France's CAC-40 fell 0.4 percent to 3,893.98 while Britain's FTSE 100 was down less than 0.3 percent at 5,981.29, a day after it broke through the 6,000 mark for the first time since the summer of 2008.

Both markets are only open for half the day while Germany's DAX is closed until Monday.

As a result, trading is proving sluggish though a downgrade of Portugal's credit rating from Fitch Ratings has weighed on sentiment. The downgrade was announced after markets closed on Thursday.

Fitch said it was reducing its rating on the country's debt by one notch to A+ from AA- and warned that further downgrades may be in the offing by maintaining its negative outlook. The agency said it was getting increasingly worried over the country's ability to raise money in the markets to finance its hefty borrowings.

Portugal is widely-considered to be the eurozone country most at risk of needing financial help from its partners in the European Union and the International Monetary Fund - Greece and Ireland have already suffered the ignominy of being bailed out.

Concerns over Europe's debt crisis have not stopped Europe's stocks rising strongly this year and enjoying their best December for ten years. That's not been the case for the euro, which has been dogged all year by worries that the crisis would spread.

The impact of the downgrade has been muted, given lackluster trading conditions, though the debt crisis will likely be a major influence once again when the bulk of traders in Europe return to their desks in the new year.

"Growth prospects for the eurozone are mediocre, and the attention will remain on any new developments in the sovereign crisis," said Herve Goulletquer, an analyst at Credit Agricole.

By mid morning London time, the euro was flat at $1.3118, while the dollar was unchanged at 83 yen.

Earlier in Asia, the Shanghai Composite index declined 0.7 percent to 2,835.16 and the Shenzhen Composite Index for China's smaller, second market fell 1.8 percent to 1,292.02. Hong Kong's Hang Seng Index closed 0.3 percent lower at 22,833.90

Carmakers led the retreat, with Dongfeng Motor Group., which operates a joint venture with Nissan Motor Co., tumbling 7.9 percent on the Hong Kong exchange. Geely Automobile Holdings, which bought Sweden's Volvo Cars from Ford Motor Co. earlier this year and is also listed in Hong Kong, dropped 6 percent. Shanghai Automotive Industry Corp., which has joint ventures with General Motors and Volkswagen, fell 2.3 percent in Shanghai.

Analysts said automakers were hit by news that Beijing is planning to sharply limit new vehicle registrations to try to ease massive traffic jams that are rapidly turning the capital's streets into parking lots.

The city will only allow 240,000 vehicles to be registered next year, said Zhou Zhengyu, vice secretary general of the Beijing city government. The figure is equal to a little more than one-third of the total number of new cars put on the capital's streets this year.

The auto industry has been a key motor of China's economic boom and any attempts to contain it will likely impact on the country's economic growth.

Elsewhere in Asia, the Nikkei 225 stock average lost 0.6 percent to 10,279.19, reopening after a national holiday Thursday.

Benchmark oil for February delivery rose 93 cents to $91.41 in electronic trading on the New York Mercantile Exchange.

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AP Business Writer Kelvin Chan in Hong Kong and researcher Ji Chen in Shanghai contributed to this report.

[Associated Press; By PAN PYLAS]

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