Weak economic signals steer world markets down

[May 16, 2011]  BANGKOK (AP) -- A loss of momentum on Wall Street, dropping commodity prices and worries over Europe's debt problems caused world stock markets to sag Monday.

In early European trading, Britain's FTSE 100 lost 0.2 percent to 5,915.70 and Germany's DAX was down 0.6 percent to 7,358.25. France's CAC-40 withered 0.9 percent as the country reeled from the arrest of prominent political figure and International Monetary Fund head Dominique Strauss-Kahn in New York for alleged sexual offences.

Wall Street was headed for a lower opening, with Dow Jones industrial futures slipping 24 points to 12,532 and S&P 500 futures losing 3.2 points to 1,330.80.

Doubts about the strength of the U.S. economic recovery have weighed on Wall Street and markets elsewhere recently. After sailing through their best first quarter since 1998, U.S. stocks are starting to lose some momentum.

The Standard and Poor's 500 stock index, a broad market benchmark, is up just 1 percent this quarter after jumping 5.4 percent in the first three months of the year. That weaker performance is in large part because of conflicting data about the health of the U.S. economy.

Sluggishness on Wall Street was a sign that "investors continued to worry about slowing global growth and European debt concerns," said Ben Potter of IG Markets in Melbourne.

Meanwhile, the arrest Saturday of Strauss-Kahn on attempted rape and sexual assault charges might prove a distraction in Europe, where the IMF and Strauss-Kahn have been heavily involved in trying to resolve debt crises in Portugal and Greece, said Jackson Wong, vice president at Tanrich Securities in Hong Kong.

A member of France's Socialist party, Strauss-Kahn was also widely considered the strongest potential challenger next year to President Nicolas Sarkozy, whose political fortunes have been flagging.

Japan's Nikkei 225 index dropped 0.9 percent to close at 9,558.30 with banking shares incurring losses following comments last week by Chief Cabinet Secretary Yukio Edano suggesting that Tokyo Electric Power Co. will need help repaying its debts. Mitsubishi UFJ Financial Group Inc. lost 1 percent. Mizuho Financial Group and Sumitomo Mitsui Financial Group Inc. both lost 1.5 percent. TEPCO itself plummeted 7.3 percent.

Edano said Friday that TEPCO may need adjustments to its loans to help it cope with financial losses incurred following twin natural disasters on March 11 -- an earthquake and subsequent tsunami that smashed into one of the company's nuclear plants in northeastern Japan.

The utility has been struggling for two months to bring a radiation leak from the crippled Fukushima Dai-ichi plant under control. TEPCO has sought a 2 trillion yen ($24.8 billion) loan to tide it through the initial emergency period. It also expects to pay 50 billion yen ($620 million) to nearly 80,000 residents evacuated from around the plant. Overall damages are expected to be much higher.

Elsewhere, South Korea's Kospi lost 0.8 percent to 2,104.18, and Hong Kong's Hang Seng shed 1.4 percent to 22,960.63. Benchmarks in Singapore, Indonesia and Taiwan were also lower, while those in New Zealand and the Philippines rose.

Falling commodities prices were keeping stock investors at bay, said Wong. Oil, for example, was nearly $114 a barrel at the end of April but is now below $100 per barrel. Hong Kong-listed shares of CNOOC, China National Offshore Oil Corp., fell 2.2 percent.

Australia's S&P/ASX 200 closed 1.3 percent lower to 4,650, with BHP Billiton, the world's largest mining company, dropping 1.8 percent. Energy Resources of Australia tumbled 3.9 percent.

Mainland Chinese shares lost ground Monday following the latest increase in the central bank's reserve requirement for banks, which was announced Friday.

The benchmark Shanghai Composite Index lost 0.8 percent to 2,849.07 and the Shenzhen Composite Index of China's smaller, second exchange lost 0.2 percent to 1,198.72.

Banking shares fell. Industrial & Commercial Bank of China, the country's biggest lender lost 1.5 percent.

"Liquidity will continue to be restrained with inflation still over 5 percent. Since we can expect further tightening measures, how could there be a 'bull market'?" said Liu Kan, an analyst at Guoyuan Securities, based in Shanghai.

On Friday, the Dow Jones industrial average lost 100.17 points to close at 12,595.75. The S&P 500 fell 0.8 percent to 1,337.77, and the Nasdaq lost 1.2 percent to 2,828.47.

Benchmark crude for June delivery was down $1.70 to $97.86 a barrel in electronic trading on the New York Mercantile Exchange. The contract settled at $99.65 per barrel Friday, up 68 cents.

In currencies, the euro strengthened to $1.4133 from $1.4110 in late afternoon trading Friday in New York. A little over a week ago the euro was worth as much as $1.49. The dollar was little changed at 80.85 yen.

[Associated Press; By PAMELA SAMPSON]

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