A possible reason of Yesterday's market actions...
World stocks slide on China rate hike jitters
By KELVIN CHAN, AP Business Writer Kelvin Chan, Ap Business Writer – Fri Nov 12, 10:50 am ET
LONDON – Chinese shares led world markets lower Friday amid mounting concerns Beijing will raise interest rates to cool its overheating economy. Ongoing fears that Ireland will need a financial bailout also kept investors on edge.
Investors also found scant cheer from a meeting of global leaders in South Korea that did little to defuse currency and trade tensions and from a report that European economic growth slowed in the third quarter.
In late afternoon European trading, France's CAC-40 was down 40.83 points, or 1.1 percent, at 3,826.52 while Britain's FTSE 100 index of leading British shares fell 14.40 points, or 0.3 percent at 5,800.63. Germany's DAX was up just under 3 points at 6,725.79.
In the U.S., the Dow Jones industrial average was down 64.90 points, or 0.6 percent, to 11,218.20 an hour into the session, while the broader Standard & Poor's 500 index fell 9.79 points, or 0.8 percent, to 1,203.75.
Those falls were dwarfed however by the 5.2 percent slide in China's Shanghai Composite index to 3,310.58 as investors fretted about the possibility of more government measures to tighten credit and slow economic growth after inflation hit a 25-month high in October. The Shenzhen Composite Index for China's smaller second exchange slumped 6.1 percent.
"Worrywarts are hopping scared that a pick-up yesterday in consumer prices to the highest pace in two years will be enough to inspire the Peoples Bank to further tighten monetary policy," said Andrew Wilkinson, senior market analyst at Interactive Brokers.
The newsflow out of Seoul did little to entice investors to pile back into stocks. Markets had been hoping the Group of 20 major advanced and developing nations could trash out a more comprehensive deal than the one they agreed to.
"The absence of a co-ordinated view, especially from the trade surplus economies like China and Germany, in how to deal with global imbalances meant that specific policy details have yet to be agreed upon," said Neil MacKinnon, global macro strategist at VTB Capital.
The crux of the dispute is Washington's allegations that Beijing is artificially keeping its currency, the yuan, weak to gain a trade advantage. But the U.S. position has been undermined by its own recent policy of printing money to boost a sluggish economy, which is expected to weaken the dollar.
The G-20 meeting has been overshadowed in Europe by mounting fears that Ireland — one of Europe's most financially troubled countries — will not be able to cut public spending and have to seek some form of financial bailout.
Investors fear that the worries could spread to other European countries with weak economies.
"Whether or not the G-20 has taken a key step toward rectifying global imbalances has in any case been lost by the financial markets focus on the continued escalating sovereign debt turmoil in Ireland and Portugal with concerns that contagion could drag Spain into trouble as well," said Derek Halpenny, currency strategist at Bank of Tokyo-Mitsubishi UFJ.
Flagging European growth figures did little to inspire investors.
Third-quarter growth in the 16-country euro zone slowed to 0.4 percent in the July to September period from 1 percent in the previous quarter, largely because of lower growth in Germany, Europe's biggest economy, and an unexpected fall in industrial output in the Netherlands.
German stocks fared better than others in Europe as investors seemed pleased by Germany's 0.7 percent growth, which was in line with forecasts and showed that the country's broad-based recovery was still healthy.
A survey on November consumer sentiment from the University of Michigan that came in just above expectations did little to boost U.S. stocks.
Earlier in Asia, Japan's benchmark Nikkei 225 stock index ended down 136.65 points, or 1.4 percent, to 9,724.81 and Australia's S&P/ASX 200 shed 0.8 percent to 4,692.70.
Hong Kong's Hang Seng fell 1.7 percent to 24,270.26 and South Korea's Kospi retreated 0.1 percent to 1,913.12.
In currencies, the dollar was 0.2 percent lower at 82.31 yen while the euro was up 0.4 percent at $1.3723.
Benchmark crude for December delivery slid $1.58 to $86.42 a barrel in electronic trading on the New York Mercantile Exchange after falling as low as $85.51. The contract settled unchanged at $87.81 on Thursday.
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Associated Press business writer Joe McDonald in Beijing contributed to this report
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