Stock markets cool off following gains last week

Associated Press
Japanese Prime Minister Shinzo Abe, center, talks with business leaders during Japan's business organizations joint New Year's party in Tokyo,  Monday, Jan. 7, 2013. Asian stocks cooled off Monday as some investors sold shares to lock in profits following recent rallies. (AP Photo/Shizuo Kambayashi)
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Japanese Prime Minister Shinzo Abe, center, talks with business leaders during Japan's business organizations joint New Year's party in Tokyo, Monday, Jan. 7, 2013. Asian stocks cooled off Monday as some investors sold shares to lock in profits following recent rallies. (AP Photo/Shizuo Kambayashi)

LONDON (AP) — Global stock markets drifted lower on Monday as some investors sought to cash in on last week's strong gains and worries grew of more political brinkmanship in Washington.

Major indexes surged last week after U.S. lawmakers passed a bill to avoid a combination of government spending cuts and tax increases that have come to be known as the "fiscal cliff."

The deal, however, remains incomplete. Politicians will face another deadline in two months to agree on more spending cuts and the prospect of more squabbling seemed to hurt market sentiment.

Meanwhile, the U.S. economy keeps recovering, though only at a modest rate. On Friday, official figures showed employers added 155,000 jobs in December, roughly as expected. The good sign was that hiring held up during the tense fiscal negotiations in Washington. But the increase was not large enough to bring the unemployment rate down from 7.8 percent.

Having enjoyed a good few days, investors appeared ready to cash in some of their profits.

"It just seems like markets are entering a consolidation phase after recent gains," Stan Shamu, market strategist at IG Markets in Melbourne, said in a market commentary.

Britain's FTSE 100 fell 0.4 percent to close at 6,064.58 while Germany's DAX dropped 0.6 percent to 7,732.66. France's CAC-40 lost 0.7 percent to 3,704.64.

Wall Street traded lower as well, with the Dow shedding 0.6 percent to 13,358.10 and the broader S&P 500 falling 0.6 percent to 1,457.78.

The one bright spot was the banking sector, where stocks were up after global regulators eased new rules obliging lenders to set capital aside. The so-called Basel III rules are a set of new international standards to make sure banks don't fall back into the sort of trouble that caused the 2008 financial crash. On Sunday, the officials setting those rules delayed the date by which certain amounts of cash had to be readily available.

The move caused a jump in bank shares - Deutsche Bank rose 2.8 percent but the biggest gains were among ailing Spanish banks, which some had feared would struggle to meet the new cash requirements. Bankinter soared 9.2 percent and Banco Popular gained 2.1 percent higher.

The subdued mood in the broader markets was also seen earlier in Asia. The Nikkei in Tokyo fell 0.8 percent to close at 10,599.01.

The Hong Kong Hang Seng was nearly unchanged at 23,329.75. South Korea's Kospi lost less than 0.1 percent to 2,011.25. Benchmarks in Singapore and Taiwan fell while mainland Chinese shares rose. Weakness in Australian's resource sector sent the S&P/ASX 200 in Sydney 0.1 percent lower to 4,717.30.

South Korean and Taiwanese companies that were fined by China last week for fixing prices of LCD display screens saw their stocks tumble Monday. Taiwan's AU Optronics Corp. fell 5.1 percent. HannStar Display Corp. fell 4.7 percent. South Korea's LG Display fell 2.6 percent.

In commodity markets, the benchmark crude oil contract for February delivery was 14 cents lower at $92.95 per barrel in electronic trading on the New York Mercantile Exchange.

In currencies, the euro edged 0.2 percent higher at $1.3105 while the dollar dropped against the Japanese yen, to 87.69 yen from 88.13 yen on Friday.

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Pamela Sampson in Bangkok contributed to this report.

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