Stocks muted as China manufacturing weakens

Associated Press

TOKYO (AP) — Global stock markets swung between gains and losses Friday as fresh data showed China's manufacturing weakening and investors grew wary over prospects for resolving an impasse that could bring on drastic spending cuts by the U.S. government.

China's manufacturing grew at its weakest rate in five months in February as demand faltered and factories shut down for the Lunar New Year holiday. Economic data from Japan showed a slight improvement in unemployment but a plunge in business investment and persisting deflation. That dimmed optimism over the nomination of Haruhiko Kuroda, a backer of Prime Minister Shinzo Abe's deflation-fighting economic strategies, to become head of the Bank of Japan.

Share prices initially fell but then regained lost ground in early European trading. The FTSE 100 index of leading British shares was down 0.1 percent at 6,353.76 while Germany's DAX gained 0.3 percent to 7,760.80. The CAC-40 in France was up 0.2 percent at 3,729.76.

Futures augured mixed trading on Wall Street. Dow futures were up 0.1 percent at 14,048 and S&P 500 futures shed 0.1 percent to 1,512.40.

In Asia, Tokyo's Nikkei 225 stock index gained 0.4 percent to 11,606.38 on expectations that the Bank of Japan will push ahead with more drastic monetary easing under its future new governor, Haruhiko Kuroda. Kuroda, whose nomination for the post requires parliamentary approval, is expected to succeed the current BOJ governor, Masaaki Shirakawa, when he steps down on Mar. 19.

Property shares were sharply higher, with Japan Real Estate Investment jumping 3.9 percent while Sumitomo Realty & Development surged 5.9 percent.

Elsewhere in Asia, Hong Kong's Hang Seng dropped 0.6 percent to 22,880.22. Australia's S&P/ASX 200 shed 0.4 percent to 5,086.10. South Korean markets were closed for a public holiday. Mainland China's benchmark fell 0.3 percent to 2,359.51.

Markets in Taiwan, Singapore and Malaysia were higher while shares in the Philippines and New Zealand lost ground.

Investors are keeping an eye on risks from U.S. spending cuts due to take effect at the start of March as part of a previous budget agreement between the White House and Congress. The planned "sequester" could hit U.S. growth if no deal is reached to avoid it, though past experience suggests a last-minute deal may be cobbled together.

"Some investors are in a wait and see mode," said Linus Yip, a strategist at First Shanghai Securities in Hong Kong, where he said the market was consolidating after Thursday's rally.

Yip said sentiment, while cautious, was underpinned by expectations that monetary easing will continue as central banks endeavor to minimize any potential impact if the U.S. budget standoff is not resolved in time.

Wall Street got a temporary boost Thursday from news the U.S. economy grew at an annualized rate of 0.1 percent in the final three months of 2012 instead of contracting as estimated earlier but gains faded, with the Dow Jones industrial average shedding 20 points, or 0.2 percent, to 14,054.

That's 110 points below the record close it reached in October 2007 and within 15 points of that level during the day Thursday. The Standard & Poor's 500 index ended down a point, or 0.1 percent, at 1,514. The Nasdaq composite lost two points, or 0.1 percent, to close at 3,160.

The U.S. dollar has rallied this week thanks to positive economic news and rising tensions over Italy. The euro was down 0.1 percent at $1.3082 while the dollar was up 0.1 percent at 92.60 yen.

The yen slipped to the 94 yen to the dollar level earlier in the weak and then bounced higher on concern over the potential impact of Italy's political morass. But Abe's decision to name Kuroda, president of the Asian Development Bank, as governor of Japan's central bank raised expectations for further weakening of its currency.

Benchmark crude for April delivery was down 18 cents at $91.77 a barrel in electronic trading on the New York Mercantile Exchange.

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