Friday, March 12, 2010

World Stocks Down After Chinese Inflation Jump

European stock markets fell modestly Thursday amid gowing concerns of an overheating Chinese economy and as investors awaited further insight into the state of the U.S. economic recovery.

In Europe, the FTSE 100 index of leading British shares was down 31.49 points, or 0.5 percent, at 5,609.08 while the CAC-40 in France was 22.14 points, or 0.6 percent, lowr at 3,921.41. Germany's DAX fell 13.04 points, or 0.2 percent, to 5,923.68.

Wall Street was poised for modest declines at the open - Dow futures were down 27 points, or 0.3 percent, at 10,538, while the broader Standard & Poor's 500 futures fell 4.6 points, or 0.4 percent, at 1,141.10.

"Financial makets are finely poised," said Kit Juckes, chief economist at ECU Group.

Juckes reckons that much will hinge on whether the S&P 500 can break through its previous high of 1,150 - on Wednesday, the S&P 500 closed up 5.16 points, or 0.5 percent, at 1,145.61.

"My bets, unchanged of late, are that equitie break out to the upside," he added.

Stocks have not been jolted out of their current torpor by weekly jobless claims figures - the fall in the number of workers filing for unemployment benefits fell 6,000 to 462,000 last week, more or less in line with expectations.

More will come on Friday when U.S retail sales and consumer sentiment figures, which should shine a light on the state of consumption in the U.S. The state of the U.S. consumer is particularly important for the U.S. economy as retail spending accounts for around 70 percent of theworld's largest economy.

Earlier in Asia, worries about rising inflationary pressures in China reined in any buying momentum, though Japan's Nikkei 225 stock average gained 88.91 points, or 0.9 percent, to 10,653.70 as investors were boosted by a news report the government will soon upgrade its economic asessment for this year.

The markets are wary at the moment by concerns that the monetary authorities in China may start raising interest rates soon to keep a lid on mounting inflationary pressures - figures earlier showed that China's inflation rate jumped to 2.7 percent in February over a year earlier from1.5 percent in January.

Any moves to raise the cost of borrowing in China or curb lending by Chinese banks will stoke concerns around the world that Chinese economic growth will slow down - one of the major reasons behind the global recovery from recession has been elevated growth levels in China.

"The People's Bank of China is behind the curve and needs to take action on the liabilities side of banks' balance sheets," said Diana Choyleva, an analyst at Lombard Street Research.

In Australia too, there was a break in the recent slew of positive economic news. The jobless rate edged up slightly to 5.3 percent in February, the first rise since peaking at 5.8 percent last October.