European stocks mixed, Asia rises on US bank plan

LONDON -- European markets were mixed Tuesday, a day after surging on hopes that a U.S. plan to rid banks of festering debts at the heart of the financial crisis will revive growth. Asian stock markets continued their rally.

By noon in mainland Europe, Britain's FTSE 100 was down 1 percent to 3,913.09. Germany's DAX rose 0.4 percent to 4,194.41 and France's CAC 40 climbed 0.4 percent to 2,879.61. The markets 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 was expected to open lower after the Dow Jones industrial average jumped 6.8 percent Monday on the government plan. An unexpected rise in home sales also lifted the mood of traders. Dow Jones industrial average futures fell 0.79 percent to 7,651, Standard & Poor's 500 index futures lost 1.06 percent to 808.60, and Nasdaq 100 index futures were down 0.94 percent to 1,240.25.

The markets will be looking to Washington for direction later. The Federal Reserve's chairman and the secretary of the treasury are making a rare joint appearance later Tuesday at a congressional hearing to testify over bonuses at American International Group Inc. They are also expected to face questions on details of the bad debt plan.

In Europe, British stocks were weighed by the news 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 heavy losers. Antofagasta fell 8.2 percent, Anglo American lost 7.8 percent and Rio Tinto tumbled 7.4 percent.

But markets across Asia gained. 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 believe is still 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 272.77, or 3.3 percent, to 8,488.30, and Hong Kong's Hang Seng index was up 462.92 points, or 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, Australia's stock measure added 0.8 percent and Taiwan's benchmark was up 2.3 percent. India's Sensex traded 1.3 percent higher at 9,542.33.

Among Asia's best performers were financials, which have recovered sharply in recent weeks. Mitsubishi UFJ Financial Group Inc., Japan's largest bank, rose 4.5 percent, while top Australian investment bank Macquarie Group galloped ahead by 5 percent.

On Monday in New York, investors sent stocks surging, and the Dow rose 497.48, or 6.8 percent, to 7,775.86, its highest finish since Feb. 13. The Standard & Poor's 500 index rose 54.38, or 7.1 percent, to 822.92, crossing the psychological milepost of 800.

Oil prices dipped in Europe, with benchmark crude for May delivery down 65 cents at $53.15. The contract rose $1.73 to settle at $53.80 overnight.