European, Asian markets mixed despite inflation concerns

Tuesday, May 27, 2008
European stock markets edged higher Monday after key Asian markets fell amid worries about high oil prices and the U.S. economy on a day when U.S. markets were closed for the Memorial Day holiday. Key stock market indicators edged up in Germany and France but the main market gauges fell more than 2% in Japan and Hong Kong after the Chinese government announced an overhaul of its telecommunications sector.

Crude oil futures rose to a record above $135 a barrel last week and were trading above $133 a barrel in electronic trading on Monday after militants in Nigeria said they destroyed an oil pipeline and killed 11 soldiers. The government said none of its troops had died.

In Germany, the DAX was up 0.1% at midday to 6,953.27 amid light trading, a reflection of the bank holiday in the U.S. and United Kingdom, traders said, though automobile stocks like Daimler AG, BMW AG and Volkswagen AG all posted declines after crude oil prices rose higher in trading.

Shares of Daimler were down 1.35% while BMW slipped 1.3%. Volkswagen, Europe's biggest automaker by sales, saw its shares slip 0.88% in late afternoon trading.

In France, the CAC-40 was up 0.28% to 4,947.36, led by France Telecom, which rose 2.2% on news that Finland may be willing to sell its stake in TeliaSonera, the Swedish-Finnish telecom giant.

In Tokyo, the benchmark Nikkei 225 index dropped 2.3% to 13,690.19.

"What underlined selling was ongoing concern over inflation as oil prices still remained very high," said Kazuhiro Takahashi, general manager at Daiwa Securities SMBC Co. in Tokyo.

Hong Kong shares were dragged down by a plunge in China Mobile, the mainland's largest mobile service provider, on worries about increased competition after China announced that it was restructuring its telecommunications sector. The blue-chip Hang Seng Index fell 2.4% to 24,127.31.

Traders said turnover has been relatively low lately, indicating trade would remain sluggish in the near future, as oil prices are likely to climb further and the U.S. economy slows.

"Trading is sluggish, as there's no clear picture for both local and regional markets," said Linus Yip, a strategist at First Shanghai Securities.

China Mobile shares tumbled 8.2%. China's three other Hong Kong-listed telecom operators — China Unicom, China Netcom and China Telecom — are also involved in the restructuring, but remained suspended from trading Monday.

On the Chinese mainland, the Shanghai benchmark index fell to a one-month low on renewed worries over further monetary tightening. The benchmark Shanghai Composite Index fell 108.55 points, or 3.1%, to 3,364.54, the lowest since April 23.

Financial shares were among the worst hit, with Haitong Securities plunging by the daily 10% limit and Industrial & Commercial Bank of China sinking 3%.

The Australian share market fell for a third day to an almost three-week low on concerns higher crude oil prices, a stronger Australian dollar and inflation will crimp economic growth and company earnings. The benchmark S&P/ASX 200 index dropped 1.1% to 5,707.

Pakistan's benchmark stock index plunged to its lowest level in eight months amid investor anxiety over political and economic uncertainty. The 100-share benchmark index at the Karachi Stock Exchange tumbled 3.3 percent to 13,011.74, the lowest since Sept. 11, 2007.

In currencies, the dollar was quoted at 103.43 yen midafternoon in Frankfurt, up from 103.28 yen in New York late Monday. The euro stood at $1.5771, compared with $1.5770 in New York. (AP)