World shares sluggish as New Year's cheer cools

[January 05, 2011]  BEIJING (AP) -- World stocks were down slightly Wednesday as investors took profits following solid New Year momentum and watched China for possible policy changes.

Oil prices dropped below $89 a barrel Wednesday in Asia, extending losses from the previous session despite signs U.S. crude demand may be improving. The dollar was unchanged against the yen and up against the euro.

Japan's Nikkei 225 stock average fluctuated in and out of negative territory after climbing to a seven-month closing high Tuesday. It ended down 17.33 points, or 0.2 percent, at 10,380.77.

China's benchmark Shanghai Composite Index declined 0.5 percent to 2,838.59, while Hong Kong's Hang Seng Index lost 0.4 percent to 23,757.82.

"The Dow Jones and S&P 500 have been going up for several days. Everyone made money, so everyone wanted to take some out and put it in their pocket," said Peng Yunliang, a market strategist for Shanghai Securities.

In Europe, France's CAC-40 was down 0.9 percent at 3,880.09 while Germany's DAX lost 1.2 percent to 6,889.09. London's FTSE 100 was flat at 6,013.87.

South Korea's Kospi fell 0.1 percent to 2,082.55 and Australia's S&P/ASX 200 lost 0.6 percent to 4,714.90 as lower commodities prices hit resource-related shares. Singapore gained 0.2 percent while India's Sensex dropped 1.2 percent to 20,256.10.

Asian banks retreated, with Japan's Mitsubishi UFJ Financial Group down 1.1 percent and Bank of China Ltd. fell 0.4 percent in Hong Kong.

Investors were watching Beijing for possible policy changes amid efforts to cool inflation. A state newspaper said Wednesday the central bank might adjust bank reserve levels on a monthly basis to curb excessive lending.

Concern about possible Chinese rate hikes and an end to tax breaks that helped to buoy China's auto sales last year might drag on markets, Peng said.

"The market might rise in the near term, but it might go down in the middle of the year," Peng said.

On Tuesday, a rally in New York that pushed stocks up nearly 7 percent in December took a pause, with traders shrugging off a pickup in factory orders and a sharp rise in monthly sales from General Motors and Ford.

The Dow Jones industrial average rose 20.43 points, or 0.2 percent, to end the day at 11,691.18. The broader S&P 500 index dipped 1.69 points, or 0.1 percent, to close at 1,270.20. The Nasdaq lost 10.27 points, or 0.4 percent, to 2,681.25.

In currencies, the dollar was unchanged at 82 yen from late Tuesday. The euro stood at $1.3240 from $1.3305.

Benchmark oil for February delivery fell 57 cents to $88.01 a barrel in electronic trading on the New York Mercantile Exchange. The contract dropped $2.17 to settle at $89.38 a barrel Tuesday.

Other commodities retreated as well as traders sold to take advantage of hefty price gains in 2010. March silver gave up $1.617, or 5.2 percent, to settle at $29.508 an ounce Tuesday. February gold dropped $44.10, or 3.1 percent, to $1,378.80 an ounce.

[Associated Press]

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