World markets stall after Greece gets debt warning

[July 05, 2011]  BANGKOK (AP) -- World stocks stalled Tuesday after comments on Greece by Standard & Poor's underlined that the debt laden country may be unable to avoid defaulting.

Oil prices hovered below $95 a barrel while the dollar rose against the yen and the euro.

In early European trading, Britain's FTSE 100 rose 0.1 percent to 6,023.49 and Germany's DAX was 0.2 percent higher at 7,455.62. France's CAC-40 dropped 0.3 percent to 3,991.81.

Wall Street appeared poised for a mixed opening after a three-day holiday weekend. Dow Jones industrial futures rose 0.1 percent to 12,531 and S&P 500 futures slipped less than 0.1 percent to 1,334.10.

Earlier in Asia, Japan's Nikkei 225 index rose narrowly to 9,972.46, a two-month closing high.

South Korea's Kospi rose 0.8 percent to 2,161.75. Samsung Electronics Co., the top global manufacturer of flat screen televisions, memory chips and liquid crystal displays, rose 2.4 percent. Hynix Semiconductor Inc., one of the world's leading memory chip makers, jumped 3.9 percent.

With Wall Street closed Monday for a holiday, markets were focused on Greece. Sentiment last week was buoyed after the country's lawmakers backed austerity measures required from international creditors in return for emergency cash, which diminished fears of a broader European crisis.

That changed Monday, however, when credit ratings agency Standard & Poor's warned that a proposal by French banks to help Greece with its financial crisis would likely amount to a debt default.

Some analysts said they believed that a Greek default was inevitable, no matter what aid was provided, and that such a default had already been factored into markets.

"The S&P is doing the right thing because Greece is really not able to pay its debts. That is why they should be in default, even though there are rescue packages," said Jackson Wong, vice president at Tanrich Securities in Hong Kong. "We already know this fact, so it was a little bump in the situation."

Hong Kong's Hang Seng slipped 0.1 percent to 22,747.95, with banking shares sliding after Moody's Investor Service said Beijing's estimate of local government debt was likely too low -- raising concerns that Chinese banks could be hurt if borrowers cannot repay loans.

Shares of Hong Kong-listed Industrial and Commercial Bank of China, the world's biggest bank by market value, dropped 0.5 percent. China Construction Bank Ltd., the country's third-biggest commercial lender, lost 1.2 percent.

While a majority of loans to local Chinese governments are assumed to be of good quality, "we conclude that the banks' exposure to local government borrowers is greater than we anticipated," a Moody report quoted vice president Yvonne Zhang as saying. The agency views the outlook for the Chinese banking system "as potentially turning to negative."

Benchmarks in Australia, New Zealand, Singapore and Indonesia were also lower.

But the Shanghai Composite Index gained 0.1 percent to 2,816.36 and the Shenzhen Composite Index added 0.6 percent to 1,195.83. Shares in chemicals were buoyed by speculation that half-year results will be better than earlier forecast.

China Vanke, the industry leader in real estate, gained 1.5 percent after reports said its sales in January-June exceeded the total for all of 2009. Yongtai Technology hit the daily 10 percent limit.

Attention will turn to U.S. jobs data Friday. After a string of mostly poor economic indicators in recent weeks, investors will be looking for indications that the U.S. recovery is getting back on track.

On Thursday, the European Central Bank is expected to raise its main interest rate by a quarter of a percentage point for the second time since April.

Benchmark oil for August delivery was down 25 cents at $94.70 a barrel in electronic trading on the New York Mercantile Exchange. Crude last settled down 48 cents at $94.94 on Friday.

In currencies, the euro dropped to $1.4487 from $1.4511 late Thursday in New York. The dollar strengthened to 81.10 yen from 80.84 yen.

[Associated Press; By PAMELA SAMPSON]

AP researcher Fu Ting in Shanghai contributed to this report.

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