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April 14, 2011

World markets down as commodities threaten profits
World markets down as higher commodities prices threaten to undermine economic growth, profits

Alex Kennedy, Associated Press, On Thursday April 14, 2011, 4:28 am EDT

SINGAPORE (AP) — World stocks were mostly down Thursday amid concerns that rising food and fuel costs could undermine consumer demand, hurting economic growth and company profits.

Oil prices hovered above $107 a barrel in Asia as a large drop in U.S. gasoline supplies suggested the two-month crude rally hasn’t yet undermined consumer demand. Crude has risen about 27 percent since mid-February. In currencies, the dollar was lower against the yen and the euro.

European shares were down in early trading. Britain’s FTSE 100 drooped 0.5 percent, Germany’s DAX slipped 0.2 percent to 7,162.90 and France’s CAC-40 was 0.5 percent down to 3,984.94. Wall Street was headed for a lower opening, too, with Dow Jones industrial futures down 12 points to 12,187 and S&P 500 futures lower by 2 points to 1,306.70.

Asian shares fared only slightly better. Tokyo’s Nikkei 225 was up 0.1 percent to close at 9,653.92, and South Korea’s Kospi was 0.9 percent higher to 2,141.06. Hong Kong’s Hang Seng index was down 0.5 percent to 24,014.

Asian investors were eyeing mixed signals on U.S. economic growth. While the unemployment rate has dropped this year as the economy creates more jobs, exports in February were weaker than expected.

“While softness in U.S. growth is a concern, the real issue for investors is the second-round effects of high and rising commodity prices,” said Clive McDonnell of BNP Paribas in Singapore. “For Asia in particular, margins in the consumer sectors are at risk as we pass the sweet spot of rising commodity and equity prices.”

China’s benchmark Shanghai Composite Index was 0.3 percent lower at 3,042.64 as banking and real estate stocks led the way down amid concerns that inflation data due out Friday might prompt Beijing to hike interest rates or further tighten credit curbs.

Shanghai-listed property developer Poly Real Estate Group Co. Ltd. slid 2.3 percent. Hong Kong-listed China Resources Land Ltd. was 0.3 percent down. Industrial & Commercial Bank of China Ltd., the country’s biggest commercial lender, lost 1.2 percent.

Analysts expect March inflation to rise slightly from February’s 4.9 percent, already well above the government’s official target. First quarter growth also due to be reported Friday is expected to ease from the previous quarter’s 9.8 percent.

Singapore’s Straits Times index slumped 0.4 percent to 3,160 after the central bank said Thursday it would allow the currency to strengthen in a bid to slow inflation. Singapore also reported that the economy grew a seasonally adjusted annualized 24 percent in the first quarter.

Elsewhere in Asia, Sydney’s S&P ASX 200 was down 0.6 percent at 4,884.20.

“Generally, the market feels as if it is struggling for direction. Commodities seem to have stabilized since the beginning of the week but we aren’t seeing huge amounts of buying. I think a lot of investors are a bit cautious given the recent gains and lacklustre start to the US earnings season,” Ben Potter, market strategist at IG Markets in Melbourne, said in a report.

On Wall Street, U.S. stocks ended slightly up Wednesday. The Standard & Poor’s 500 index rose 0.25 point, or less than 0.1 percent, to 1,314.41. The Dow Jones industrial average rose 7.41, or 0.1 percent, to 12,270.99. The Nasdaq composite gained 16.73, or 0.6 percent, to 2,761.52.

Stocks gave up earlier losses after the Federal Reserve said economic conditions were improving in all 12 regions it surveyed. Markets were also anticipating Thursday’s release in Washington of weekly jobless claims.

Financial companies fell nearly 1 percent, the most of any group in the S&P 500 index, after the head of JPMorgan Chase said that nationwide investigations into how banks handled foreclosures likely to result in corporate fines and penalties.

Benchmark crude for May delivery was down 4 cents at $107.07 a barrel in electronic trading on the New York Mercantile Exchange. The contract gained 86 cents to settle at $107.11 on Wednesday.

The dollar fell slightly to 83.32 yen from 83.82 in New York late Wednesday, while the euro was up slightly at $1.4475 from $1.4441.

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