World stock markets falter after one-day rebound

LONDON: World stock markets stumbled on Friday after a one-day rebound, with Wall Street shares opening lower on inflation data that was nonetheless seen as helping curb losses in Europe.   

Asian exchanges earlier in the day ended the week with mixed fortunes, with losses recorded in Tokyo and Shanghai while markets in Hong Kong, Seoul and Kuala Lumpur were nearly flat.   

In New York, the Dow Jones Industrial Averag was down 0.37 per cent at 12,115.14 at mid-day and the tech-dominated Nasdaq had shed 0.38 per cent to reach 2,369.62 points.   

Analysts said the latest inflation reading would likely cement a decision next week by the US Federal Reserve to keep US interest rates on hold at 5.25 per cent. The Fed, which has cited inflation as one of its key concerns, meets on Tuesday and Wednesday to mull US rates.   

The Labour Department said on Friday that US consumer prices rose 0.4 per cent in February, stronger than the 0.3 per cent rise widely expected by Wall Street.   

The core inflation reading, which strips out volatile food and energy costs, rose 0.2 per cent and was in line with forecasts.   

"The Fed is not out of the woods with respect to inflation, so despite slowing growth, expect another hold from policymakers next week," Wachovia economists said in a note to investors.   

"The Fed anticipates a reduction of inflation and over time we agree. The problem is that the decline is not fast enough to give the Fed maneuvering room at present," agreed Stephen Gallagher, an economist at Societe Generale.   

Separately, the Fed reported that US industrial production rebounded by a much stronger-than-expected 1.0 per cent in February after falling in the prior month.   

In Europe the inflation and industrial production readings were viewed positively and helped to pare losses. The London FTSE 100 index shed 0.04 per cent to close at 6,130.6 while in Paris the CAC 40 fell 0.14 per cent to 5,382.16. In Frankfurt the Dax slipped 0.07 per cent to finish at 6,580.78 points.   

Elsewhere in Europe, there were declines of 0.12 per cent in Milan, 0.26 per cent in Amsterdam and 0.13 per cent in Brussels. Prices edged up 0.12 per cent in Zurich and 0.27 per cent in Madrid.   

A rout on global equity markets earlier this week, sparked by fears of a meltdown in the US housing market, was checked Thursday with solid share price gains in the United States, Europe and Asia.   

Analysts said it was no surprise markets were taking a breather on Friday after the recent large swings, particularly ahead of the weekend.   

In addition, remarks from Alan Greenspan caused jitters after the former Fede chief told a conference that US home loan problems could spill over into the wider economy, although there was no evidence yet of such a trend.   

With a long US property boom now fading into memory, mortgage delinquencies and defaults are on the rise, especially at the lower or "sub-prime" level among people with poor credit scores and those who borrowed beyond their means.   

"Sentiment was dampened by uncertainties about the US economic situation," added Hiroaki Hiwada, a strategist at Toyo Securities in Tokyo, where the Nikkei-225 index ended down 0.69 per cent on Friday.   

China's shares prices closed down 0.72 per cent on Friday. Elsewhere in Asia, Sydney ended 0.29 per cent lower and Singapore was down 0.86 per cent, while Hong Kong, Seoul and Kuala Lumpur were more or less stable. But Taipei added 0.31 per cent, Jakarta was up 0.40 per cent and Manila put on 0.61 per cent.   

"The volatility of the past week provides a reminder that the share market correction is not necessarily over and that the US economy is the real issue, not the Chinese share market," said AMP Capital Investor strategist Shane Oliver in Sydney.