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World stock markets mixed amid Korean hostilities

World stock markets mixed amid Korean hostilities

November 24th, 2010 in News

BANGKOK (AP) - World stock markets were mixed Wednesday as traders began to shake off jitters over a tense standoff between North and South Korea, although some investors viewed Europe's debt problems with renewed trepidation.

Oil prices rose to near $82 a barrel in Asia as an upward revision of U.S. economic growth and a report showing an unexpected jump in crude inventories provided mixed signals on demand. In currencies, the dollar rose against the yen and the euro.

European bourses were higher in early trading, with Britain's FTSE 100 up 0.5 percent to 5,610.79 and Germany's DAX 0.5 percent higher to 6,737.960. France's CAC-40 was up 0.4 percent to 3,739.96. Wall Street was set for a muted start with Dow futures down less than 0.1 percent at 11,009.

The picture was mixed in Asia, a day after an artillery clash between North and South Korea sent tensions on their divided peninsula soaring. South Korea's financial markets opened sharply lower - 2.4 percent - before quickly paring losses; the Kospi finished the day only 0.2 percent lower at 1,925.98.

Japan's Nikkei 225 stock average fell 0.8 percent to 10,030.11, after briefly falling below the 10,000 mark earlier in the session. The South Korean won dropped as much as 3.2 percent against the dollar in early trading, but recovered to finish 0.4 percent lower.

Rommel Lee, an analyst at Shinhan Investment Corp. in Seoul, said that China's call for a peaceful solution to the tension on the Korean peninsula helped calm nerves among investors Wednesday. Chinese Foreign Ministry spokesman Hong Lei on Tuesday called on both sides, without naming them, "to do more to contribute to peace and stability on the peninsula."

"China saying to North Korea, 'find a peaceful solution to this incident' caused a positive reaction in the market, and overall it limited the negative effect," said Lee.

Hong Kong's Hang Seng index finished 0.6 percent up to 23,023.86. On the mainland, Chinese shares rebounded in active trading, with the benchmark Shanghai Composite Index gaining 1.1 percent, to 2,859.94. The Shenzhen Composite Index for China's smaller, second exchange rose 2.6 percent to 1,333.74.

As the Korean crisis receded - at least in the eyes of investors - they began to worry anew that the much ballyhooed bailout of Ireland's banking sector may not be enough to contain Europe's debt crisis. Stock traders panicked and dumped European shares Tuesday, sending Portugal's benchmark stock index down 2.2 percent by the close. The euro slid below $1.34 for the first time in two months as investors sought the relatively safety of the dollar.

Spooked by the scale of Greece's bailout requirements in May and Ireland's banking failures, international investors are looking much closer at the public finances of eurozone countries and they don't like what they're seeing, particularly in Portugal.

"For a while now, investors were pretty complacent over the European credit woes. So I think investors have underestimated how long the Irish problem may drag out," said Sean Darby, chief Asia Strategist at Nomura Global Equity Research in Hong Kong.

Shares in Australia and Taiwan were lower, while benchmarks in New Zealand and Singapore finished up.

The Korean incident had less of an effect on U.S. markets, but investors there still dumped shares heading into the Thanksgiving holiday. Sentiment was also hurt as the Federal Reserve lowered its growth forecast for next year.

In a report releasing minutes from its last meeting Nov. 3, the Fed predicted that the economy will grow only 2.4 percent to 2.5 percent this year. That's down sharply from a previous projection of 3 percent to 3.5 percent. Next year, the economy will expand by 3 percent to 3.6 percent, the Fed said, also much lower than its June forecast.

Benchmark oil for January delivery was up 48 cents to $81.73 a barrel in electronic trading on the New York Mercantile Exchange. The contract lost 49 cents to settle at $81.25 on Tuesday.

In currencies, the dollar fell to 83.02 yen from 83.16 late Tuesday in New York. The euro dropped to $1.3344 from $1.3363.