World stocks slip on Fed remarks about US economy
Originally published June 23, 2011 at 12:53 a.m., updated June 23, 2011 at 4:48 a.m.
BANGKOK (AP) — World stocks markets followed Wall Street down Thursday after the Federal Reserve admitted to being caught off guard by recent signs of deterioration in the U.S. economy.
Oil prices fell below $94 a barrel amid a stronger U.S. dollar.
In early European trading, Britain’s FTSE 100 sank 0.5 percent to 5,743.62. Germany’s DAX fell 0.7 percent to 7,224.75 and the CAC-40 in Paris lost 0.7 percent to 3,844.14.
Stocks in New York were headed for a second day of losses, as Dow Jones futures slipped 0.1 percent to 12,008 and S&P 500 futures were 0.2 percent lower at 1,277.
Comments by Fed Chairman Ben Bernanke, who said at a press conference in Washington that some of the problems plaguing the U.S. economy “may be stronger and more persistent than we thought,” turned investors away from stocks, analysts said.
“We did have a pretty good bounce on Monday and Tuesday because of hopes that the (Europe debt) crisis might improve a little. However, now all the hype is gone, and we are focusing on the U.S. economy, which is slowing down a little more than expected,” said Jackson Wong, vice president at Tanrich Securities in Hong Kong.
Japan’s Nikkei 225 closed 0.3 percent lower at 9,596.74, with losses in shares of heavy machinery and equipment companies, which are likely to feel any slowdown in the global economy more sharply. Mitsubishi Heavy Industries Ltd. dropped 1.8 percent and Komatsu Ltd. lost 0.9 percent.
Losses were limited, however, by export shares that benefited from a weaker yen, which makes products sent overseas cheaper. Consumer electronics giant Sony Corp. rose 0.8 percent.
Nissan Motor Corp. rose 1.3 percent after announcing that it expected vehicle sales to go higher in all major regions for the fiscal year through March 2012 despite difficulties faced by the company in the aftermath of the huge earthquake and tsunami on March 11.
Hong Kong’s Hang Seng lost 0.5 percent to 21,759.14 but shares on the mainland rose after China’s top planning agency said inflation would moderate after rising in June, easing the need for further credit tightening in the second half of the year.
The Shanghai Composite Index gained 1.5 percent to 2,688.25 and the Shenzhen Composite Index gained 2.1 percent to 1,111.18. Shares in cement, glass and furniture rallied due to government plans for massive construction of public housing.
“Investors expect the authorities to ease credit tightening measures as the inflation comes under better control than earlier feared. Recent losses also may spur a rally in a medium-term,” said Hu Yi, an analyst at China Jianyin Investment Securities.
Elsewhere, South Korea’s Kospi was down 0.4 percent at 2,055.86 and Australia’s S&P/ASX 200 lost 0.7 percent to 4,500.50. Benchmarks in Taiwan and the Philippines were also lower, while those in New Zealand, Singapore and Malaysia rose.
Also Wednesday, the Fed released a slightly lower forecast for U.S. economic growth this year. The Fed said it now expects the economy to grow between 2.7 percent and 2.9 percent this year, down from its previous estimate of 3.1 percent to 3.3 percent after its last meeting in April.
The Dow Jones industrial average and the Standard & Poor’s 500 index fell after Bernanke’s cautious remarks about the economy. The Dow closed down 0.7 percent at 12,109.67. The S&P 500 index fell 0.7 percent to close at 1,287.14. The Nasdaq fell 0.7 percent to 2,669.19.
Even with the dimmer outlook, the Fed pledged no new help to boost the economy. The central bank’s $600 billion bond-buying program draws to a close at the end of this month.
Bernanke also said Greece’s debt crisis was a “very difficult situation.” Worries that Greece would default on its debts — an event that could spark financial crises elsewhere in Europe and beyond — have weighed on global financial markets since May.
Benchmark oil for August delivery was down $1.67 to $93.73 a barrel in electronic trading on the New York Mercantile Exchange. The contract gained $1.24 to settle at $95.41 on Wednesday.
In currencies, the euro dropped to $1.4277 from $1.4376 late Wednesday in New York. The dollar strengthened to 80.53 yen from 80.32 yen.
AP researcher Fu Ting contributed from Shanghai.
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