China weighs on markets despite stimulus hope

An investor gestures as she looks at the stock price monitor at a private securities company in Shanghai, China, on Aug. 10, 2012. AP Photo

(AP) LONDON - A round of weak Chinese economic figures that provided further evidence of a slowdown in the world's second largest economy weighed on global markets Friday.

However, the figures, which come a day after China reported a slowdown in auto sales and factory output, are likely to heap the pressure on Beijing to take more measures to boost economic growth. Those expectations prevented stocks from falling too much.

Of the figures released Friday, most concern centered on the trade data for July. Exports rose just 1 percent over a year earlier, sharply below forecasts of 5 percent, while import growth fell to 4.7 percent from the previous month's 6.3 percent, also below expectations.

The trade surplus with the 27-nation European Union, China's biggest trading partner, narrowed by 37.9 percent to $10.8 billion, reflecting sluggish demand in Europe, which is wrestling with a debt crisis and recession.

"The swath of disappointing data has confirmed how difficult it is to turn China's economy around and whilst we can expect stimulus measures to be introduced, questions remain as to how effective they will be in the short term," said Rebecca O'Keeffe, head of investment at Interactive Investor.

In Europe, Germany's DAX fell 0.3 percent to 6,944 while the CAC-40 in France was 0.7 percent lower at 3,433. The FTSE 100 index of leading British shares was 0.1 percent lower at 5,845.

Wall Street was poised for a lower opening, with both Dow futures and the broader S&P 500 futures down 0.3 percent.

Despite the modest pullback on Friday, stocks are likely to once again end higher for the overall week. In the last couple of weeks, markets have been buoyed by hopes the European Central Bank will resume its purchases of bonds from countries like Spain and Italy.

That has brought down the borrowing rates for Spain and Italy and helped the recovery in the value of the euro and in the price of oil.

"This week looks like another positive week for equity markets in spite of some pretty dire economic data from pretty much all over the world," said Michael Hewson, senior market analyst at CMC Markets.

"The expectation is that the worse the data, the more likely it will be that central banks in China, the U.K. and the European Central Bank will step in to support asset prices, by easing monetary policy further," he added.

Alongside falling stocks, the euro and oil prices took a hit Friday, but will still end the week higher. The euro was 0.2 percent lower at $1.2275 while the benchmark New York oil price was 78 cents lower at $92.58 a barrel.

Earlier in Asia, Japan's Nikkei 225 index fell 1 percent to close at 8,891.44. Hong Kong's Hang Seng shed 0.7 percent to 20,136.12 and South Korea's Kospi bounced closed 0.3 percent higher at 1,946.40.

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