World stocks down after China inflation report

Thursday, May 9th, 2013 | Finance News

BANGKOK (AP) — World stock markets were mostly lower Thursday as investors weighed an interest rate cut in South Korea against rising inflation in China.

South Korea's Kospi index jumped 1.2 percent to 1,979.45 after the Bank of Korea lowered its benchmark interest rate for the first time in seven months. In announcing that it was lowering the rate by a quarter percentage point to 2.5 percent, the Bank of Korea became the latest central bank to take steps to boost flagging economic growth.

"Overall sentiment continues to be dictated by central bank actions and hopes of more policy accommodation," said analysts at Credit Agricole CIB in Hong Kong.

Elsewhere, however, waning momentum dragged markets lower.

European shares were lower in early trading. Britain's FTSE 100 fell nearly 0.1 percent to 6,578.80. Germany's DAX lost 0.2 percent to 8,231.97. France's CAC-40 shed 1.1 percent to 3,913.04. Wall Street appeared headed for slight losses after recent record highs. Dow Jones industrial futures fell 0.1 percent to 15,052 while S&P 500 futures shed 0.1 percent to 1,626.90.

Hong Kong's Hang Seng fell 0.1 percent to 23,211.48 after the Chinese government issued a report showing that inflation rose slightly in April, which could temper any stimulus response by Beijing to China's shaky economic recovery. The rise was driven by a 4 percent gain in food costs.

"The inflation was a little bit higher than expected, especially food prices," said Francis Lun, chief economist at GE Oriental Financial Group. "That shows the central bank cannot relax monetary policy just yet. So that brought down the market today."

Additionally, government data released Wednesday showed April trade growth accelerating, but Lun said export figures might be inflated and China's recovery might be weaker than it looks.

Mainland Chinese shares were mixed. The Shanghai Composite Index lost 0.6 percent to 2,232.97, while the smaller Shenzhen Composite Index gained 0.2 percent to 967.69.

Japan's Nikkei 225 index shed its morning gains to drop 0.7 percent to 14,191.48. Australia's S&P/ASX 200 was marginally down at 5,198.40.

On Wall Street, the Dow Jones industrial average closed above 15,000 for a second day Wednesday, another record finish.

Benchmark oil for June delivery was down 41 cents to $96.21 per barrel in electronic trading on the New York Mercantile Exchange. The contract rose $1 to finish at $96.62 a barrel on the Nymex on Wednesday, its highest level since April 2.

In currencies, the euro rose to $1.3168 from $1.3159 late Wednesday in New York. The dollar fell to 98.76 from 98.82 yen.

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