World stocks turn sour on weak European data

Market Analyze

AMSTERDAM World stock markets were mixed Thursday, as disappointing news about German growth cut short a rally ahead of a major economic summit over the weekend.

European stocks reversed early gains to trade lower after official figures showed that Germany's economy shrank in the fourth quarter of 2012, on weak demand from other European nations. Germany relies heavily on exports to other European countries, many of which are in recession. Latest figures from the European data service Eurostat showed that the economy across the 17 European Union countries that use the euro fell 0.6 percent in the final three months of 2012.

"With increased uncertainty stemming from the euro crisis and the global economic cooling in the second half of the year, the German economy has finally lost its invincibility," said ING Senior Economist Carsten Brzeski. "Looking ahead, however, there is increasing evidence that the economy should pick up speed again" later in the year, he predicted.

Germany's DAX fell 0.6 percent to 7,666.79. Britain's FTSE 100 was down 0.4 percent at 6,336.30. France's CAC-40 fell 0.3 percent to 3,687.68.

Wall Street futures were also modestly lower. Dow Jones industrial futures were down 48 points to 13,910.0 while S&P 500 futures fell five points to 1,516.90.

But Asian stock markets finished mostly higher, ahead of a meeting this weekend of finance ministers of the Group of 20 major advanced and developing nations in Moscow.

Japan's Nikkei 225 index rose 0.5 percent to close at 11,307.28, brushing aside data showing the Japanese economy shrank for a third straight quarter in the last three months of 2012.

Investors believe the yen's recent weakness will boost company earnings -- and there will be more to come.

The Bank of Japan ended a policy meeting Thursday with no new initiatives, which was the expected outcome ahead of an impending leadership change at the central bank.

But its governor Masaaki Shirakawa, who has appeared at odds with Prime Minister Shinzo Abe's views, is resigning next month, giving the government an opportunity to find a successor more sympathetic to Abe's push for ultra-loose monetary policy.

South Korea's Kospi rose 0.2 percent to 1,979.61. Australia's S&P/ASX 300 advanced 0.7 percent to 5,036.90 largely due to gains in the resource sector. Hong Kong's Hang Seng added 0.9 percent to 23,413.25 amid muted trading. Markets in Singapore and the Philippines fell while mainland China and Taiwan remained closed for Lunar New Year holidays.

Francis Lun, managing director of Lyncean Holdings in Hong Kong, said the local market was being led higher by financial stocks on "a rumor" that Chinese banks would be given permission to increase lending. Agricultural Bank of China rose 3.4 percent. Industrial & Commercial Bank of China, the world's largest bank by market value, advanced 2.5 percent.

The Hang Seng, reopening after a three-day holiday, displayed no sign of distress over North Korea's underground nuclear test that took place Tuesday.

"Unless they throw a nuclear bomb at South Korea or Japan, nobody thinks much of it," Lun said.

Benchmark oil for March delivery also erased early gains to fall 10 cents in electronic trading to $96.91 per barrel on the New York Mercantile Exchange. The contract had dropped 50 cents to finish at $97.01 a barrel on the Nymex on Wednesday.

In currencies, the euro fell to $1.3328 from $1.3447 late Wednesday in New York. The dollar was almost unchanged at 93.46 yen from 93.48 yen.