European shares fall, Asia markets mixed

Business Materials 4 July 2008 22:47 (UTC +04:00)

European markets fell and Asian markets were mixed Friday as investors digested uneven readings on the U.S. economy and oil prices that remained near records. Japan posted its 12th straight day of losses.

Trading was subdued as U.S. financial markets were closed for the July Fourth holiday, the AP reported.

In Europe, Britain's FTSE 100 closed down 1.16 percent to 5,412.80, German's DAX fell 1.28 percent to 6,272.21, and France's CAC-40 slid 1.80 percent to 4,266.00.

In Asia, Indonesia's main index rebounded after selling off nearly 4 percent the prior session. Hong Kong and Australia equities also were higher.

With stocks hit hard recently, some Asian investors were returning to the market to take advantage of lower prices. Others who bet on falling prices were starting to take profits, further supporting prices.

"Investors are still bearish, we've been down a lot in the past few weeks. But even those bears are a bit hesitant on selling at this level," said Y.K. Chan, fund manager at Phillip Capital Management in Hong Kong.

Elsewhere, markets in Japan, mainland China, South Korea and Malaysia lost ground.

The current market climate in Europe is "a bit morose anyway" because of the high oil price and the credit crunch, said Andrew Bell, head of research at Rensburg Sheppards, an investment management company in Britain.

Unlike in the first quarter of the year when "people were genuinely panicking because they didn't feel confident in the banking system," Bell said that "fear of the whole system unravelling" wasn't around today.

"But that doesn't stop the markets falling because company earnings are being squeezed by rising costs, weaker economic growth and tighter credit," he said.

On Friday, UBS AG shares rose after Switzerland's biggest bank said it expects its second-quarter results to be "at or slightly below break-even" due to a tax credit that will offset investment losses and added it won't need to seek more capital for the third time this year. Analysts had been expecting a second-quarter loss of as much as $4.9 billion.

Investors got little guidance from the U.S. overnight after a mixed assessment on the world's largest economy. While the country's service sectors shrunk, a tame jobs report eased some worries about the labor market.

Oil prices slipped toward $144 a barrel in electronic trading by afternoon in Europe. The contract hit a record trading high at $145.85 a barrel Thursday on the New York Mercantile Exchange. There was no floor trading in New York on Friday because of the nation's Independence Day celebration.

In Tokyo, the benchmark Nikkei 225 Stock Average fell 0.2 percent to 13,237.89 points. The index has shed more than 8 percent of its value over the 12-day fall - the longest losing streak since it stumbled 15 straight sessions in 1954.

The market was dragged down by real estate firms, paper makers, retailers and power companies.

Property firm Urban Corp. dropped 28 percent on mounting credit fears in the sector. The worries led the Japan Credit Rating Agency last month to conduct emergency reviews of its rating on real estate developers, and it downgraded Urban's rating June 4. The company's shares have been plunging since.

Also down were Sumitomo Realty & Development Co. and Mitsubishi Estate Co.

Oji Paper Co. and Nippon Paper Group Inc. both fell after Deutsche Securities said the companies' earnings could miss projections owing in part to their "optimistic outlook on crude oil prices."

Hong Kong's blue-chip Hang Seng Index climbed nearly 0.9 percent to 21,423.82 points.

Financials help lift the market amid reports that Industrial and Commercial Bank of China, the country's biggest lender, expected net profit to rise 50 percent in the first half. ICBC climbed 2 percent. Standard Chartered was up 4.2 percent.

Telecoms, seen by some analysts as a safer play during periods of high inflation, rose. China Netcom was up almost 4 percent and its suitor, China Unicom, gained 2.1 percent.

Hong Kong rose despite weakness in mainland China, where the key Shanghai index skidded 1.2 percent to 2,669.89 points.

Chinese coal shares fell on fears of a possible coal resource tax revenue plan, which could be announced this weekend.

One of the day's worst-hit stocks was coal producer China Shenhua Energy Co., which closed down 8.1 percent. China Coal Resources dropped 7.9 percent. Xishan Coal and Electric Corp. plunged by 10 percent, the daily limit.

Most institutional investors remain worried about the big picture, said Fan Zejie, an analyst for Shanghai Leading Investment and Consulting Co. Ltd.

"There are too many uncertainties in the next half-year, like inflationary pressures brought by natural disasters, the management of non-tradeable shares and the high production prices of raw materials," Fan said.