Stocks mostly down amid economic uncertainty
Wednesday 29 August 2012
Stocks edged down today as investors varied between cheering the modest recovery in the United States and wondering if the world economy was still bad enough to push central banks to act.
With many market players in wait-and-see mode, trading has been thin and erratic in recent days. Investors are cautious about taking risky bets with so many unclear signals on the direction of the economy.
In Europe, the FTSE index of leading British shares fell 0.6 per cent to close at 5,743.53, while France's CAC-40 pulled back 0.5 per cent to 3,413.89. The DAX in Germany, meanwhile, eked out a gain of 0.1 per cent at 7,010.57.
The US Commerce Department announced today that the American economy grew at a 1.7 per cent annual rate in the April-June quarter, the latest in a string of signs the world's No. 1 economy is experiencing a modest recovery. That revision was slightly better than the initial estimate of 1.5 per cent. The news, however, failed to boost US markets.
The modest improvement is still insufficient to lower the unemployment rate, and investors have been hoping that the Federal Reserve might act to give the economy a boost. More information on the Fed's thinking will come later today, when the bank releases its "Beige Book" survey on how the economy is faring. Also, Fed Chairman Ben Bernanke will give a speed in Jackson Hole, Wyoming, on Friday.
he Dow Jones industrial average was flat at 13,109, while the broader Standard & Poor's index was also trading even at 1,411.
Investors are meanwhile trying to read the tea leaves on the European Central Bank, which has indicated it is ready to intervene to push borrowing costs lower for struggling countries — but hasn't spelled out how or when it will act. Yesterday, President Mario Draghi cancelled his trip to Jackson Hole, leading many to speculate the bank is drafting a plan of action.
Hopes for central bank action in Europe, however, were mostly overwhelmed by bad news. On Tuesday, the Spanish region of Catalonia asked for a € 5 billion rescue loan. That's an added burden on the government in Madrid, which is trying to prop up sinking banks and restart growth — and some fear it could push Spain's economy into its own bailout.
"For most of August little has been able to disturb the narrative of ECB action that is expected in September, but this morning that theory is under threat as one of the largest Spanish regions makes a request for assistance from Madrid," said Chris Beauchamp, a market analyst at IG Index.
The euro fell 0.1 per cent to $1.2544, while the yield, or interest rate, on Spain's benchmark 10-year bond stood uncomfortably at 6.42 per cent. That's close the 7 per cent mark that has pushed other countries to seek rescue loans.
Earlier in Asia, stocks were mixed. The Tokyo Stock Exchange's benchmark Nikkei rose 0.4 per cent to 9,069.81 and South Korea's Kospi added 0.6 per cent to 1,928.54. Hong Kong's Hang Seng Index turned 0.1 per cent lower at 19,788.51. Australia's S&P/ASX 200 lost nearly 0.1 per cent to 4,356.04.
Benchmarks in Singapore and Taiwan rose, while Indonesia and Thailand fell.
On mainland China, the Shanghai Composite Index lost 1 per cent to 2,053.24 — its lowest closing in more than three years. The Shenzhen Composite Index lost 0.6 per cent to 851.14.
Benchmark oil for October delivery fell $1.18 to $94.14 per barrel in electronic trading on the New York Mercantile Exchange.
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