World stocks fall as dollar slides; gold at record

By JEREMIAH MARQUEZ

posted: 53 MINUTES AGO

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HONG KONG -World stock markets dropped Thursday as mostly positive economic news in the U.S. failed to inspire investors and the dollar tumbled to its lowest point against the Japanese yen in more than 14 years.

Gold, meanwhile, hit a new record high of $1,196.8 an ounce as investors increased their bets on commodities to hedge against the sinking dollar. European stocks followed Asia down in early trade.

Concerns the greenback will continue to languish showed few signs of letting up following indications the U.S wasn't overly concerned about its currency's slide and will keep interest rates at ultra low levels for some time.

That helped dragged the dollar as low as 86.27 yen — its weakest level since July 1995. The rising Japanese currency in turn hit shares of major exporters like Canon and Honda whose overseas profits and competitiveness erode with a stronger yen.

Japanese Finance Minister Hirohisa Fujii tried to assure the market he was closely monitoring the situation and would "take appropriate steps if foreign exchange rates move abnormally." But that did little to ease investor worries.

"His comments don't really mean anything," said Tsuyoshi Segawa, equity strategist at Mizuho Securities in Tokyo. "He is the finance minister, so of course he should be monitoring foreign exchange closely."

Major markets throughout Asia fell, with Japan's Nikkei 225 stock average losing 58.40 points, or 0.6 percent, to 9,383.24.

In China, the Shanghai index tanked 119.19 points, or 3.6 percent, to close at 3,170.98, the biggest one-day fall since August 31. Hong Kong's Hang Seng shed 1.8 percent to 22,210.41

The losses came amid worries about the market's recent run-up as well as speculation Chinese banks may have to raise more money in case losses from bad loans start to climb.

The lackluster debut in Hong Kong of major lender China Minsheng Banking Corp. — its shares tumbled over 8 percent — added to the dour mood and dragged down banking shares.

Markets in Australia, Singapore, Taiwan and Indonesia also closed lower.

As trading opened in Europe, benchmarks in Britain and Germany fell about 1.5 percent each.

In Tokyo, Toyota fell 1.2 percent after the world's largest automaker said it plans to replace the gas pedals on 4 million vehicles in the United States because of a dangerous flaw.

Overnight in the U.S., a drop in unemployment claims and a rise in home sales lifted stocks in light trading ahead of the Thanksgiving holiday Thursday, when U.S. markets are closed.

The Dow Jones industrial average rose 30.69, or 0.3 percent, to 10,464.40, its second gain in three days and its best finish since October 2008.

The broader Standard & Poor's 500 index rose 4.98, or 0.5 percent, to 1,110.63, and the Nasdaq composite index rose 6.87, or 0.3 percent, to 2,176.05.

Oil prices fell to near $77 a barrel Thursday in Asia, with benchmark crude for January delivery down 93 cents to $77.03. The contract rose $1.94 on Wednesday.

In currencies, the dollar was lower at 86.94 yen from 87.35 yen. The euro traded lower at $1.5057 from $1.5132.

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AP Writer Tomoko A. Hosaka contributed to this report from Tokyo.

2009-11-26 05:19:24