Germany, France up slightly, Dow slips
LONDON -- Stocks closed slightly higher in Germany and France on Tuesday, but bigger gains evaporated after a downbeat open on Wall Street, just a day after the Dow surged on hopes for a U.S. plan to rid banks of untradeable assets.
Asian markets continued their rally, closing sharply higher.
At the close, Germany's DAX rose 0.3 percent to 4,187.36 and France's CAC 40 climbed 0.2 percent to 2,874.39. But Britain's FTSE 100 was down 1.1 percent at 3,911.46 on sinking metal commodity stocks.
European indexes had surged between 2.7 percent and 2.9 percent Monday after the Obama administration detailed a plan to clean up as much as $1 trillion in toxic securities and loans weighing down bank balance sheets with the help of private investors.
Wall Street opened lower Tuesday, after the Dow Jones industrial average jumped a huge 6.8 percent Monday following the government plan and an unexpected rise in home sales. In midday trading Tuesday in New York, the Dow Jones industrial average was down 0.7 percent to 7,718.19, the Standard & Poor's 500 index lost 0.6 percent to 818.16, and the Nasdaq 100 composite index was down 1.3 percent to 1,536.09.
Markets received little momentum from comments by Treasury Secretary Timothy Geithner, who asked Congress on Tuesday for broad new powers to regulate nonbank financial companies, such as troubled insurer American International Group, whose collapse could jeopardize the economy.
At the same time, Federal Reserve Chairman Ben Bernanke revealed that he had considered filing suit to keep AIG from paying millions in executive bonuses, but that his legal advisers counseled him against it.
In Europe, British stocks were weighed down by the news that inflation in Britain rose unexpectedly in February as higher prices for food and fuel and a weaker pound offset the deflationary effects of the economic crisis. The annual consumer price index rose to 3.2 percent from 3.0 percent in January, the Office for National Statistics said. Most analysts were expecting that rate to drop as weaker demand causes retailers to cut prices to attract shoppers.
"In the U.K. what does seem to have piled the pressure on was the inflation numbers because they came in so different to what was forecast," said David Jones, chief market strategist for IG Index.
"It remains to be seen whether this is just a little easeback after the rises we saw yesterday, or the start of something severe. Maybe the worry is with the quantitative easing in the U.K. and what the Americans are doing with their buyback of bonds, does this raise the specter of higher inflation again."
In London, commodity stocks were the heaviest losers, dragged down by weaker metals prices. Antofagasta closed down 8.0 percent, Anglo American lost 6.4 percent and Rio Tinto tumbled 2.2 percent.
In Frankfurt, Deutsche Bank shares rose 4.5 percent after the company said it had had a good start to the year. It also said that compensation for its top five executives had been cut 86 percent.
Whereas trading was mixed in Europe, stocks rose sharply across Asia. Financial firms jumped, Japanese exporters rose on the sliding yen, and South Korean stocks got a boost from plans for massive stimulus spending.
Asian markets have risen sharply recently, with Japan and Hong Kong's indexes each surging a stunning 20 percent over the last two weeks.
But analysts cautioned investor sentiment, while recovering in the short term, was still fragile. Doubts about the U.S. plans -- about how to price the assets and account for losses, among other issues -- could smother in the coming days what many think is an abridged rally in a longer bearish trend.
"At the end of the day there has been no game changer even if the plan is implemented perfectly. And that's an enormous 'if,'" said Kirby Daley, senior strategist at Newedge Group in Hong Kong.
In Japan, the Nikkei 225 stock average gained 3.3 percent to close at 8,488.30, and Hong Kong's Hang Seng index was up 3.4 percent at 13,910.34.
South Korea's Kospi gained 1.9 percent to 1,221.70 as the government announced it would plow an extra $20.9 billion into creating new jobs and bolstering the economy. That represents more than twice the extra spending implemented during the 1997-98 Asian economic meltdown.
Elsewhere, Shanghai's index rose 0.6 percent. Stocks also rose in Australia, Taiwan, and India.
Oil prices dipped in Europe, with benchmark crude for May delivery down 76 cents at $53.04. The contract rose $1.73 to settle at $53.80 overnight.