Asian markets mixed on worries about US inflation

[March 20, 2009]  HONG KONG (AP) -- Asian stock markets were mixed Friday as investors turned cautious amid worries the U.S. Federal Reserve's latest move to combat recession in the world's largest economy will lead to rampant inflation. European shares traded lower.

Trade was lackluster in most markets, with Tokyo closed for a holiday, as the region closed out one of its strongest weeks this year with a whimper.

Sentiment took a hit after Wall Street's rally petered out Thursday. U.S. investor euphoria over the central bank's aggressive $1.2 trillion plan to buy government bonds and debt securities gave way to fears the new spending could water down the dollar's worth and lead to higher prices across the board.

Those concerns have pummeled the dollar, which stabilized in Asia but was still headed for a 4 percent loss against the yen this week. A weaker dollar is especially unnerving in Asia, where it hurts big exporters in Japan and other countries by eroding foreign income.

While the market may see more upside, analysts were doubtful the current rally could be sustained much longer with continuing woes in the financial system and the global outlook still grim.

"I don't think anyone reasonably expects this to be a long-term rally or that we've hit bottom," said Andrew Orchard, Asian strategist for Royal Bank of Scotland in Hong Kong. "The problems with the financial system are still unknown."

In Europe, stocks headed lower in early trade. Britain's FTSE 100 lost 0.5 percent, Germany's DAX shed 0.8 percent and France's CAC-40 was off 1.6 percent.

Earlier in Asia, Hong Kong's Hang Seng led the region's declines, falling 297.41 points, or 2.3 percent, to 12,833.51, and Australia's benchmark S&P/ASX 200 stock index lost 0.4 percent to 3,465.8. Taiwan's benchmark sagged 1.5 percent.

Stocks in mainland China rose for a fifth day, with the Shanghai Composite index advancing 0.7 percent to 2,281.09 as higher commodity prices lifted metal and mining stocks. For the week, the index rose 7.2 percent.

South Korea's Kospi climbed 0.8 percent Friday to 1,171.04. Markets in the Philippines and Thailand also rose. Trading will reopen in Tokyo on Monday.

Among the worst performers were financial shares after recovering in recent days, with Australian investment Macquarie Group dropping 4.5 percent. In Hong Kong, China Mobile, the world's largest carrier by subscribers, dropped 5.4 percent after its results showed slower growth.

Overnight in the New York, banking and other financial shares dragged on the broader market, and the major indexes finished down. The Dow Jones industrial average fell 85.78, or 1.2 percent, to 7,400.80.

The broader Standard & Poor's 500 index fell 10.31, or 1.3 percent, to 784.04, while Nasdaq composite index fell 7.74, or 0.5 percent, to 1,483.48.

U.S. futures pointed to more losses on Wall Street. Dow futures were down 33 points, or 0.5 percent, to 7,378, while S&P 500 futures were down 6.8 points, or 0.9 percent to 773.3.

The dollar recovered some after tumbling overnight, gaining to 95.16 yen from 94.53 yen earlier -- but down from nearly 99 yen two days ago. The euro dipped to $1.3622 from $1.3660.

Oil prices eased after surging overnight on a weakened dollar and evidence that OPEC has significantly slowed production. Benchmark crude for April delivery was down 87 cents at $50.74.

[Associated Press; By JEREMIAH MARQUEZ]

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