World stocks up as China reports inflation rise – ET

Posted on February 15, 2011 by

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World stock markets were mostly higher Tuesday as traders digested news that China’s inflation had risen less than feared and Japan’s economic prospects were improving amid stronger global demand.

Oil prices rose above $85 a barrel as violent street protests in Iran raised fears that crude supplies from one of the world’s biggest producers could be disrupted. In currencies, the dollar rose against the yen but was lower against the euro.

European shares rose in early trading, with Britain’s FTSE 100 up 0.1 percent to 6,065.94. Germany’s DAX rose 0.2 percent to 7,409.64 while France’s CAC-40 gained 0.3 percent to 4,109.02. Ahead of the opening bell, Dow Jones industrial futures were narrowly higher at 12,229 while S&P 500 futures were also slightly up, to 1,328.

Tokyo’s benchmark Nikkei 225 stock average rose 0.2 percent, a 10-month high, to close at 10,746.67 after China announced that inflation rose to 4.9 percent in January, driven by a 10.3 percent increase in food costs. The January figure was an increase from December’s 4.6 percent rate and close to November’s 28-month high of 5.1 percent, but lower than analysts had expected.

Beijing has hiked interest rates three times since October to cool rapid economic growth and inflation pressures, causing worry among investors who fear such measures could slow Chinese growth, affecting the United States, Australia and other economies by cutting demand for their exports. But those worries were eased to some degree by January’s inflation not being as high as feared.

Investors were relieved that China’s inflation rate was lower than expected. The latest figure reassured investors for now that China is unlikely to raise interest rates soon,” said Kazuhiro Takahashi, equity strategist at Daiwa SMBC Securities Co. Ltd. in Tokyo.

The news helped boost stocks sensitive to Chinese demand, including Komatsu Ltd., a maker of construction equipment, which rose 1.1 percent; and Hitachi Construction, up 0.8 percent. Australian iron ore miner Fortescue Metals Group Ltd., which sells heavily to China, rose 0.4 percent.

Also positive for sentiment was a statement from the Bank of Japan that the country’s sluggish economy appeared to be shaking off its inertia as production and exports improve. Exports have been a key driver of Japan’s economy, which has relied on demand from the rest of the world to offset lackluster conditions at home.

Traders elsewhere in Asia were more cautious. Hong Kong’s Hang Seng dropped 1 percent to 22,899.78 while South Korea’s Kospi fell 0.2 percent to 2,010.52. Australia’s S&P/ASX 200 slipped 0.1 percent to 4,931. Markets in Singapore and the Philippines were also lower.

Mainland Chinese shares were flat, as profit taking in the afternoon offset morning gains. Shares in cement, food and oil companies led the gains, while financials weakened. The benchmark Shanghai Composite Index was virtually unchanged at 2,899.24, while the Shenzhen Composite Index edged 0.04 percent lower to 1,261.60.

Although the consumer price index increase of 4.9 percent is lower than forecast, shares are unlikely to pass the 3,000 level anytime soon,” said Wang Ren, an analyst at Ping’an Securities, in Shenzhen.

In New York on Monday, the Dow Jones industrial average slipped 5.07 points, or less than 0.1 percent, to 12,268.19. Investors are awaiting retail sales data from the Commerce Department later Tuesday for some indication of whether the U.S. economic recovery is picking up pace.

In currencies, the dollar rose to 83.57 yen in Tokyo from 83.39 yen in New York late Monday. The euro climbed to $1.3516 from $1.3484.

Benchmark crude oil for March delivery was up 20 cents at $85.01 a barrel in electronic trading on the New York Mercantile Exchange. The contract fell 77 cents to settle at $84.81 a barrel on Monday.

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