Markets stutter on Japan growth slowdown

(AP) LONDON - A bigger-than-anticipated slowdown in Japan's growth rate weighed on markets Monday though investor hopes of more stimulus measures from the world's central banks kept the selling in check.

Japan's economy grew by only 0.3 percent in the second quarter from the previous three-month period, half the rate that was expected. It was also sharply lower from the first quarter's upwardly revised rate of 1.3 percent and reflected the fallout from Europe's debt crisis and the sharp rise in the value of the yen, which makes it more difficult for the country's export sector to compete in the international marketplace.

The news comes on top a slew of reports out of Asia that point to the region losing momentum. Most concerns about Asia have centered on China - a raft of figures last week showed Chinese growth waning.

However, the selling pressure was partly offset as many investors think the world's central banks will soon enact more stimulus measures in the hope of shoring up economic growth.

While the Chinese and U.S. monetary authorities are thought to be considering how to ease monetary policy further, the European Central Bank is expected to take a more active role firefighting Europe's debt crisis in order to reduce the borrowing rates of Spain and Italy.

Those hopes have helped stocks, as well as the euro and oil prices, post solid gains over the past few weeks.

"Most investors remain convinced that central banks will respond to any economic slowdown by intervening further," said Fawad Razaqzada, market strategist at GFT Markets.

In Europe, the FTSE 100 index of leading British shares was down 0.5 percent at 5,821 but the CAC-40 in France was down 0.3 percent at 3,425. Germany's DAX was also 0.3 percent lower at 6,922.

In the U.S., the Dow Jones industrial average was down 0.4 percent at 13,149, while the broader S&P 500 index fell the same rate to 1,400.

The highlights of the economic calendar this week are likely to be Tuesday's first estimate of economic growth in the 17-country eurozone as well as July retail sales figures for the U.S.

Europe's debt woes will also garner attention, especially in the wake of some weekend comments from German lawmakers that Greece wasn't enacting enough economic reforms in return for its bailout cash.

"Greece still has the capacity to throw mud at market sentiment," said Jane Foley, an analyst at Rabobank International.

On Tuesday, Greece is due to auction a little over 3 billion euro to pay off a bond that matures at the end of the month. A failed auction could reignite concerns over the country's continued membership of the eurozone.

For now though, the euro remains relatively well-supported and was trading a further 0.6 percent higher at $1.2360.

Earlier in Asia, most stock markets closed lower, with Japan's Nikkei 225 down 0.1 percent at 8,885.15. Hong Kong's Hang Seng fell 0.3 percent to 20,081.36 and South Korea's Kospi lost 0.7 percent to 1,932.44.

In mainland China, the Shanghai Composite Index fell 1.5 percent to 2,136.08. The Shenzhen Composite Index slid 2.1 percent to 887.65. Shares in agriculture-related companies led the gains while real estate and cement producers weakened.

Oil prices remained solid, with the benchmark New York rate up 72 cents at $93.59 a barrel.