China policy tightening weighs on markets
LONDON (AP) - Stock markets ended the week broadly lower after China took further steps to rein in lending and amid worries that Ireland's financial rescue package is being delayed by disagreement over reforming its low corporate tax rate.
In Europe, the FTSE 100 index of leading British shares closed down 35.88 points, or 0.6 percent, at 5,732.83 while France's CAC-40 fell 7.81 points, or 0.2 percent, at 3.860.16. Germany's DAX bucked the trend, closing 11.44 points, or 0.2 percent, higher at 6,843.55. In the US, the Dow Jones industrial average was down 15.93 points, or 0.1 percent, at 11,165.30 around midday New York time while the broader Standard & Poor's 500 index fell 2.34 points, or 0.2 percent, to 1,194.35.
Weighing on sentiment was the news that China's monetary authorities have ordered its banks to hold back more money as reserves in a new move to curb lending and cool inflation.
That was the second reserve increase in two weeks and came as Beijing tries to restore normal financial conditions and curb inflation, which rose to a 25-month high of 4.4 percent last month. The central bank ordered lenders to set aside an additional 0.5 percent of their deposits, with effect from November 29.
One of the main worries in the markets alongside Ireland's debt crisis over recent days has been the prospect of slower Chinese economic growth in the wake of tighter monetary policy. That's important because China is now the world's second largest economy. Though yesterday's policy change did not include the expected rise in interest rates, analysts said higher borrowing costs in China are imminent.
"Fears of further monetary tightening from Beijing hit risk appetite and undermined global equity and commodity prices," said Julian Jessop, chief international economist at Capital Economics.
The increase in the reserve requirement ratios was announced after Chinese stock markets had closed higher following a fairly torrid few days, largely on concerns of tighter Chinese policy.
The benchmark Shanghai Composite Index rose 22.15 points, or 0.8 percent, to 2,887.60. The Shenzhen Composite Index for China's smaller, second exchange climbed 2.9 percent to 1,297.48.
Elsewhere in Asia, Japan's benchmark Nikkei 225 stock average gained 0.1 percent to close at 10,022.39 and South Korea's Kospi added 0.7 percent to 1,940.96. Australia's S&P/ASX 200 was 0.2 percent lower at 4,629.2, and Hong Kong's Hang Seng fell 0.1 percent at 23,605.71.
Yesterday, the euro was unchanged over the day at $1.3640.
Benchmark oil for December delivery was up 44 cents to $81.41 a barrel in electronic trading on the New York Mercantile Exchange.