World stocks fall as China trade growth slides

Associated Press
Updated 8/10/2012 7:06 AM
  • People walk past an electronic stock indicator in Tokyo, Friday.

    People walk past an electronic stock indicator in Tokyo, Friday. Associated Press

BANGKOK -- World stock markets tumbled Friday as investors withdrew from riskier assets after China's trade suffered a steeper-than-expected slowdown.

The figures, which come a day after China reported a slowdown in auto sales and factory output, underscored concerns that the world's No. 2 economy is succumbing to an economic downturn despite government efforts to stimulate growth.

Chinese trade data for July showed exports rising just 1 percent over a year earlier, sharply below forecasts of 5 percent. Import growth fell to 4.7 percent from the previous month's 6.3 percent, also below forecasts.

Meanwhile, the trade surplus with the 27-nation European Union, China's biggest trading partner, narrowed by 37.9 percent to $10.8 billion, reflecting sluggish demand as Europe wrestles with a debt crisis and recession.

European stocks dropped in early trading. Britain's FTSE 100 fell less than 0.1 percent to 5,847.10. Germany's DAX lost 0.3 percent to 6,944.68 and France's CAC-40 fell 0.7 percent to 3,433.81.

Wall Street appeared headed for a lower open, with Dow Jones industrial futures falling 0.3 percent to 13,105 and S&P 500 futures shedding 0.3 percent to 1,396.80.

Francis Lun, managing director of Lyncean Holdings in Hong Kong, said the data confirms worries that China's export industry is being hit hard by the turmoil in Europe and that drastic steps are needed to prevent China from falling into an economic trap known as stagflation in which unemployment and inflation are both high.

"That is bad news for the Chinese economy so the government will need to do something more to stimulate the economy," he said. "I think next year you will have recession and inflation at the same time -- stagnant economic growth but inflation, so people are getting poorer by the day."

Markets got off to a shaky start in Asia. Japan's Nikkei 225 index fell 1 percent to close at 8,891.44. Hong Kong's Hang Seng shed 0.7 percent to 20,136.12 and Australia's S&P/ASX 200 lost 0.7 percent to 4,277.30. South Korea's Kospi bounced up and down before closing 0.3 percent higher at 1,946.40.

Markets in Singapore, Taiwan and Indonesia opened higher but fell after China released its trade data. In mainland China, the Shanghai Composite Index fell 0.2 percent to 2,168.81. The smaller Shenzhen Composite Index lost 0.4 percent to 906.32.

Some traders held out hopes that Chinese authorities would be spurred to take steps to stanch the downturn.

The trade figures were "much worse than expected but this might mean that we do get some additional easing in the near term," Andrew Sullivan of Piper Jaffray in Hong Kong said in an email.

The figures come a day after renewed signs of sluggishness emerged from India, Asia's third-largest economy, where industrial output fell a worse-than-expected 1.8 percent in June -- its third fall in four months.

Investors also remain worried about Europe's ability to overcome its chronic debt crisis. Germany's Commerzbank on Thursday predicted lower profits for the rest of the year, a sign that customers are too nervous to invest or take out loans. Greece, meanwhile, reported that unemployment soared to 23 percent in May from 17 percent the year before and remains mired in recession.

Weekly U.S. jobless claims on Thursday showed the number of Americans applying for unemployment benefits fell slightly last week. However, the average for the past four weeks, generally a more reliable indicator, rose slightly.

Benchmark oil for September delivery was down 70 cents to $92.67 per barrel in electronic trading on the New York Mercantile Exchange. The contract finished 1 cent higher to end at $93.36 per barrel in New York on Thursday.

In currencies, the euro fell to $1.2277 from $1.2296 late Thursday in New York. The dollar fell to 78.47 yen from 78.59 yen.

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