World stock markets down ahead of ECB meeting

[June 09, 2011]  BANGKOK (AP) -- World stock markets fell Thursday as expectations grew that the European Central Bank may hike interest rates soon to ward off inflation while a Federal Reserve report added to evidence of a U.S. economic slowdown.

Oil prices jumped to above $101 per barrel after OPEC unexpectedly left its production levels unchanged. In currencies, the dollar strengthened against the yen but slipped against the euro.

Asian shares closed mostly down following a Federal Reserve report confirmed a slowdown in U.S. economic growth. Early trading in Europe also showed investment sentiment on the descent.

Britain's FTSE 100 slipped 0.2 to 5,795.81 while Germany's DAX fell 0.3 percent to 7,042.97. France's CAC-40 was 0.3 percent lower to 3,823.15.

But Wall Street appeared set for a higher opening, with Dow Jones industrial futures up 21 points to 12,051 and S&P 500 futures nearly 3 points higher to 1,279.80.

The European Central Bank is expected to signal at its monthly meeting Thursday that a rate increase is coming as early as next month.

An interest rate increase could make life harder for debt-laden countries like Greece, Portugal and Ireland, but the rest of Europe is mostly enjoying solid growth that argues for higher interest rates to prevent a jump in inflation. But investors, believing that rate hikes discourage growth and hurt stock prices, often take fright.

In Asia, Japan's Nikkei 225 index closed 0.2 percent higher to 9,467.15. South Korea's Kospi dropped 0.6 percent to 2,071.42, and Hong Kong's Hang Seng lost 0.2 percent to 22,609.83.

Tokyo Electric Power Co., the embattled Japanese utility known as TEPCO, was down 4 percent after hitting an all-time low earlier Wednesday, a day after a government-appointed panel launched an investigation into a nuclear accident that took place at one of the company's plants following a devastating earthquake and tsunami on March 11.

TEPCO has been struggling to get control of the plant since the quake and critics say the company was woefully unprepared for such a disaster.

Australia's S&P/ASX 200 rose 0.3 percent to 4,549.60, as banking and energy blue chips gained. BHP Billiton Ltd., the world's largest miner, was 0.4 percent higher, while Commonwealth Bank of Australia, the country's largest bank by market capitalization, added 0.6 percent.

But Australia's economy showed some signs of strain, with government data showing only 7,800 new jobs were created May -- well short of the 25,000 expected and indicative of a slowdown, although "probably not as much as we're seeing in the U.S.," said Ben Potter, a research analyst with IG Markets in Melbourne.

"There are a number of headwinds facing the Australian economy," he said, including a strong currency that hurt manufacturers.

Meanwhile, airline shares stalled as higher fuel costs threatened to cut into profits.

Australia's Qantas Airways Ltd. fell 2.3 percent and China's three major state-owned airlines tumbled in Hong Kong: China Eastern Airlines fell 2.8 percent, China Southern Airlines, slid 4.8 percent and Air China nosedived 3 percent.

Mainland Chinese shares erased gains from the day before as investors sold off U.S. dollar- and Hong Kong dollar-denominated B shares in expectations that the planned launch of an international share board might constrain liquidity.

The benchmark Shanghai Composite Index sank 1.7 percent to 2,703.35 while the Shenzhen Composite Index of China's smaller, second exchange lost 2.1 percent to 1,113.02.

On Wall Street, more lackluster economic news sent stocks down Wednesday. A Federal Reserve report showed the economy slowed in several regions for the first time this year, largely due to the effect of higher oil prices.

The report added to concerns that have been building since mid-April that the American economy is stalling. High oil prices, bad weather and production disruptions following the tsunami and nuclear disaster in Japan have combined to dampen many investors' outlook for the rest of the year. The Standard and Poor's 500 lost 0.4 percent, its sixth straight loss. The Dow Jones industrial average fell 0.2 percent to 12,048.94. The Nasdaq composite slipped 1 percent to 2,675.38.

Benchmark oil for July delivery was up 55 cents to $101.29 a barrel in electronic trading on the New York Mercantile Exchange. The contract gained $1.65 to settle at $100.74 on Wednesday.

The dollar strengthened to 79.97 yen from 79.94 yen late Wednesday in New York. The euro was up to $1.4617 from $1.4581.

[Associated Press; By PAMELA SAMPSON]

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