Global stocks steady ahead of US housing news

[December 28, 2010]  LONDON (AP) -- Global stocks traded in narrow ranges Tuesday in holiday-thinned trading conditions but investors continued to keep a close watch on developments in China following a recent interest rate increase and ahead of a closely watched U.S. housing survey.

In Europe, France's CAC-40 edged up 13.28 points, or 0.3 percent, to 3,875.47 while Germany's DAX rose 9.75 points, or 0.1 percent, to 6,980.48. British markets were closed for a holiday as were a number of Asian markets.

Wall Street was also poised for a fairly flat opening following subdued trading Monday -- Dow futures were up 9 points at 11,512 and the broader Standard & Poor's 500 futures 2.4 points higher at 1,255.70. Trading levels in New York, already dampened over the Christmas and New Year period will likely be further hit by the big snowstorm that hit the city over the last couple of days.

The key event later will likely be the release of the S&P/Case-Shiller U.S. house price index for October. The index is a broad gauge of U.S. home prices and could have an impact in the foreign exchange market. By late morning London time, the euro was up 0.6 percent over the day at $1.3247 while the dollar was down 0.8 percent on the day at 82.11 yen.

Japan's benchmark Nikkei 225 stock average declined 63.36 points, or 0.6 percent, to finish at 10,292.63 amid renewed worries over a strengthening yen -- a higher yen makes it more difficult for Japan's exporters to compete in international markets.

For the third straight day, Japanese officials, including finance minister Yoshihiko Noda voiced their worries about the yen's strength.

As a result, investors will be on the lookout for any actual intervention in the markets by the Japanese authorities. In September, the Bank of Japan bought dollars and sold yen for the first time in six years in the hope of putting a ceiling, at the very least, on the yen's appreciation.

With little fresh news expected this week, investors continue to evaluate the effects of China's decision over the weekend to raise its key interest rate by a quarter of a percentage point to 5.81 percent, its second increase in just over two months.

The Chinese monetary authorities are getting increasingly concerned about rising prices and the hope is that higher borrowing costs will rein in inflation, which spiked to a 28-month high in November of 5.1 percent.

However, higher interest rates could well dampen down economic growth. That's important for the world economy, because China has been a key motor over the past couple of years.

"Though the timing of the rate hikes may have come as a surprise, many analysts were anticipating China to move higher with interest rates and they are expected to continue to do so," said Eric Viloria, an analyst at Forex.com.

The surprise decision continued to weigh on Chinese stocks, and the Shanghai Composite Index fell 1.7 percent to close at 2,732.99.

Elsewhere, Hong Kong's Hang Seng index shed 0.9 percent to end at 22,621.73, while South Korea's Kospi rose 0.5 percent to finish at 2,033.32.

Benchmark oil for February delivery rose 17 cents to $91.17 in electronic trading on the New York Mercantile Exchange.

[Associated Press; By PAN PYLAS]

AP Business Writer Kelvin Chan in Hong Kong contributed to this report.

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