World stocks in pause after Dow hits 2009 high

LONDON – European stock markets pared earlier gains Tuesday ahead of an expected retreat on Wall Street, as investors booked profits on Monday's rally which pushed the Dow Jones industrial average to its highest level this year.

Analysts said it was unsurprising traders were taking a breather after Monday's big gains, when sentiment was buoyed by the weekend pledge from the Group of 20 rich and developing countries to maintain stimulus measures as long as economies remained weak.

In Europe, the FTSE 100 index of leading British shares was up 9.92 points, or 0.2 percent, at 5,245.10 while Germany's DAX rose 8.26 points, or 0.2 percent, at 5,627.98. The CAC-40 in France was 2.38 points, or 0.1 percent, lower at 3,783.11.

Wall Street was poised to open moderately lower, with Dow futures down 25 points, or 0.3 percent, at 10,167 and the broader Standard & Poor's 500 futures 3.4 points, or 0.3 percent, lower at 1,088.30.

On Monday, U.S. stocks closed around 2 percent higher in the wake of the G-20 statement, with the Dow closing at 10,226.94, its best finish this year.

David Jones, chief market strategist at IG Index, said there may be an "element of twitchiness creeping back into the market" as many of the world's major indexes approach their highest levels of the year.

Though the Dow pushed out to fresh highs for 2009, Jones noted that the FTSE 100 and the S&P 500, for example, are still trading just below their October highs.

"It would not be surprising to see markets mark time ahead of here, or even for some to book profits following the strong rise seen so far this month," said Jones.

Much could well depend on whether the S&P 500 — widely considered to be a better barometer of investor appetite than the Dow — can breach its October high of 1,097.

As a result, investors will be looking at earnings reports from a host of U.S. retailers this week. Wal-Mart Stores Inc., Abercrombie & Fitch Co., Macy's Inc. and JC Penney Inc. all report third quarter earnings. Without the help of the consumer, which accounts for around for 70 percent of the U.S. economy, any global economic recovery will be modest.

"The key 'black spots' for the U.S. economy remain the labor market and ongoing consumer de-leveraging," said Neil Mackinnon, global macro strategist at VTB Capital in London.

Earlier in Asia, Japan's Nikkei stock average added 61.74 points, or 0.6 percent, to close at 9,870.73, and Hong Kong's Hang Seng edged up 0.3 percent to 22,268.16.

Elsewhere, South Korea's markets gained 0.4 percent to 1,582.30. Shares were also higher in mainland China, Australia, Taiwan and the Philippines.

While stocks found support from the G-20 statement, the dollar has suffered. On Monday, the euro rose above $1.50 for the first time this month, with many analysts now predicting a march back to last year's all-time high of $1.6038.

By early afternoon London time, the euro was down 0.2 percent at $1.4968 while the dollar fell 0.1 percent to 89.84 yen.

The big mover in the currency markets was the pound, which slipped 0.6 percent to $1.6650 after the Fitch ratings agency warned that Britain was the major economy most at risk of losing its triple A debt rating.

"Today's Fitch report is a timely reminder that an economy which has run into trouble with too much debt and too much consumption cannot be pulled out of the crisis by putting in more debt to create even more consumption," said Hans Redeker, an analyst at BNP Paribas.

Oil prices were flat, with benchmark crude for December delivery up 1 cent at $78.44. The contract rose $2 on Monday alongside the big stock market gains.

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AP Business Writer Yuri Kageyama in Tokyo contributed to this report.