World markets mixed ahead of Fed meeting
Tuesday, April 26, 2011
BANGKOK (AP) — World stock markets were mixed Tuesday as investors looked ahead to the U.S. Federal Reserve’s updated outlook on the world’s biggest economy.
Oil prices fell below $112 a barrel, and the dollar dropped against the euro and the yen.
Shares in Europe eked out early gains, with Britain’s FTSE 100 rising 0.2 percent to 6,013.15. Germany’s DAX was up 0.4 percent to 7,323.50 and France’s CAC-40 rose by 0.3 percent to 4,023.50. Wall Street was set to gain with Dow futures up 0.2 percent at 12,447 and S&P futures 0.3 percent higher at 12,334.60.
In Asia, meanwhile, numerous factors kept investor verve in check, including a rising Japanese yen and reports of more monetary policy tightening in China.
Traders are looking to the Federal Reserve’s two-day meeting that begins Tuesday, watching for any changes to the Fed’s outlook on the economy. They also expect to find out if the Fed’s $600 billion bond-buying effort will expire as scheduled in June.
Since late last year, the Fed has bought government bonds to keep interest rates low. Fed Chairman Ben Bernanke and his colleagues are expected to signal this week that they will allow the program to expire as scheduled.
“Bernanke is not going to tell us much new,” DBS Bank Ltd. in Singapore said in a research note. “On the growth front, he could soften his tone, but is still likely to reassure markets that the recovery is gaining hold.”
Japan’s Nikkei 225 index closed down 1.2 percent to 9,558.69, with investors unloading blue chip shares ahead of what might be a punishing earnings season. Nintendo Co. Ltd. announced Monday that its annual profit dropped for the second straight year as sales of its gaming devices fell.
Canon said Tuesday following the close of markets that its first quarter net profit slipped 2.4 percent from a year earlier as costs stemming from an acquisition offset growth in emerging markets that drove demand for cameras and printers. Sales increased 11.1 percent.
Other major Japanese companies reporting this week include Honda Motor Co. and Komatsu Ltd., the world’s second-largest construction machinery maker after Caterpillar Inc.
Shares of Toyota Motor Corp. slumped 2.4 percent, a day after announcing its car production in Japan plummeted a staggering 62.7 percent in March due to a parts supply crunch following the earthquake and tsunami on March 11. The magnitude-9 earthquake and tsunami destroyed many factories in northeastern Japan, causing severe parts shortages for Toyota and other automakers.
Other major exporters slid as the yen continued to strengthen against the dollar. Honda Motor Corp. was down 1.6 percent, Sony Corp. lost 2.1 percent, and Sharp Corp. dipped 1.5 percent.
Elsewhere, South Korea’s Kospi fell 0.4 percent to 2,206.30, and Hong Kong’s Hang Seng dropped 0.5 percent to 24,007.38.
Mainland Chinese shares lost ground amid reports the central bank again raised deposit reserve requirements for some major banks, constraining liquidity already limited by earlier credit tightening moves.
The Shanghai Composite Index fell 0.9 percent to 2,938.98 while the Shenzhen Composite Index lost 1.3 percent to 1,232.80.
“The funds shortage is the worst it has been in a while, and the correction could last a few days,” said Yang Yining, an analyst at Capital-edge Investment & Management Co. Ltd., based in Shanghai.
Huaneng Power International, one of several big electricity generators suffering from surging costs for coal and oil, dropped 3.1 percent, while PetroChina, the country’s biggest oil and gas company, lost 1.2 percent as crude oil prices eased to near $111 a barrel.
Weak earnings on Wall Street propelled stocks lower on Monday. The Dow Jones Industrial Average lost 0.2 percent to close at 12,479.88. The Standard & Poor’s 500 index lost 0.2 percent to 1,335.25. The Nasdaq composite edged up 0.2 percent to 2,825.88.
Kimberly-Clark, the maker of Kleenex and Huggies, dropped 2.7 percent after missing earnings estimates. The company also lowered its earnings forecast for the full year. Johnson Controls fell 2.8 percent, after saying it expects revenue to drop by $500 million in the third quarter because of the earthquake in Japan.
Ford Motor Co., Coca-Cola, and 3M Co. are among the companies reporting earnings Tuesday.
Benchmark crude for June delivery was down 51 cents to $111.76 a barrel in electronic trading on the New York Mercantile Exchange. The contract lost a penny to settle at $112.28 on Monday.
In currencies, the euro rose to $1.4616 from $1.4585 late Monday. The dollar fell to 81.73 yen from 82.24 yen.
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