World stocks down after Bernanke, Obama speeches

September 9, 2011 2:19:22 AM PDT
World stocks retreated Friday after Federal Reserve Chairman Ben Bernanke offered no immediate support for the ailing U.S. economy and Chinese economic data showed inflation remaining high while industrial production eased.

Oil prices fell to near $89 a barrel. The dollar strengthened against the yen and the euro.

European shares were down in early trade. Britain's FTSE 100 fell 0.7 percent to 5,302.41. Germany's DAX dropped 1.6 percent to 5,321.20 and France's CAC-40 tumbled 2 percent to 3,024.51.

Wall Street appeared headed for a mixed opening, with Dow Jones industrial futures 0.4 percent higher at 11,336 but S&P 500 futures down 0.4 percent at 1,175.

Earlier in the day, Asian shares struggled for gains. Japan's Nikkei 225 index swung between gains and losses before closing down 0.6 percent at 8,737.66.

The government reported that the country's economy contracted in the April-June quarter at an annual rate of 2.1 percent, worse than the initial estimate of 1.3 percent.

But the result was not unexpected, given the scope of the damage done by the March earthquake and tsunami that destroyed many of northeastern Japan's factories and businesses. Economists expect the world's No. 3 economy to pick up in the months ahead.

South Korea's Kospi fell 1.8 percent to 1,812.93. Australia's S&P/ASX 200 rose 0.2 percent to 4,194.7 and Hong Kong's Hang Seng was 0.2 percent lower at 19,866.63.

Mainland Chinese shares lost ground after the government reported that prices rose 6.2 percent from a year earlier. While that represented an easing from a 37-month high of 6.5 percent in July, it was far above the government's 4 percent target for the year.

China's National Statistics Bureau also said industrial production slowed in August, rising 13.5 percent from the year before, compared with a 14 percent increase in July.

The benchmark Shanghai Composite Index edged down less than 0.1 percent to 2,497.75 after gaining 1 percent earlier in the day while the Shenzhen Composite Index lost 0.6 percent to 1,094.03. Shares in securities and food-related companies led the gains while cement and biotechnology weakened.

"Inflation is within expectations but the market went lower because it's still high. Investors are worried about further credit tightening measures," said Hu Yi, an analyst at China Jianyin Investment Securities.

On Wall Street, stocks closed sharply lower Thursday after Bernanke in a speech closely watched by investors said the Fed will consider a range of steps at its Sept. 20-21 meeting.

The Dow Jones industrial average lost 1 percent to 11,295.81. The Standard & Poor's 500 index fell 1.1 percent to 1,185.90. The Nasdaq composite shed 0.8 percent to 2,529.14. Each index had posted gains earlier in the day.

Also Thursday, President Barack Obama, looking to jolt the U.S. economy back to health, proposed a $447 billion plan for creating jobs in a nationally televised speech before Congress late Thursday. Obama will likely have a hard time getting much of his plan through Congress since Republicans control the House of Representatives.

Concerns about the U.S. economy have pushed stocks lower each month since April. Many traders now say the stock market is factoring in the assumption that the economy is in a recession, meaning limited job growth and weaker corporate profits.

Benchmark oil for October delivery was down 62 cents to $88.43 in electronic trading on the New York Mercantile Exchange. Crude fell 29 cents to finish at $89.05 on Thursday.

In London, Brent crude for October delivery was steady at $114.55 on the ICE Futures exchange.

In currencies, the dollar rose to 77.57 yen from 77.54 yen late Thursday in New York. The euro was lower at $1.3859 from $1.3876.

Credit Agricole CIB said that the debt crisis swirling around smaller European countries was finally being felt by the euro, which had been showing persistent strength against the greenback.

The euro "broke below the psychologically important 1.40 level as peripheral tensions are finally beginning to take their toll on the currency," the bank said in a report.

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