European stocks steady despite US growth downgrade

By PAN PYLAS

posted: 28 MINUTES AGO

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LONDON -European stock markets and Wall Street futures were little changed Tuesday after the U.S. government confirmed that the U.S. economy did not grow as fast as previously predicted.

In its second estimate for the third quarter of the year, the Commerce Department said U.S. gross domestic product was up by an annualized rate of 2.8 percent, down on the 3.5 percent previously estimated.

The downward revision was unsurprising given lackluster trade and retail sales data.

Following the data's release, the FTSE 100 index of leading British shares was up 4.08 points, or 0.1 percent, at 5,359.58 while Germany's DAX fell 7 points, or 0.1 percent, to 5,794.48. The CAC-40 in France was down less than a point at 3,812.61.

Wall Street was poised to open largely flat — Dow futures were up 6 points at 10,428 while the broader Standard & Poor's 500 futures rose 0.7 point to 1,104.50.

Earlier, European stocks had recovered their poise following a big retreat in Asia amid further signs that the European economic recovery is gathering pace as the fourth quarter rolls on.

Germany's Ifo Institute said business confidence rose for an eighth consecutive month in November to its highest level since August 2008, while the EU's statistics office Eurostat reported that industrial orders in the 16 countries that use the euro rose by 1.5 percent in October, double market expectations.

"A run of good European data early in the session supported the mood," said Jane Foley, research director at Forex.com.

Earlier, Asian stocks had been dragged down by a warning from China's central bank that commercial banks need to control their lending.

As a result, China's Shanghai index tumbled 115.14 points, or 3.5 percent, to 3,223.53 — its biggest retreat in three months — as investors fretted over the warning. The index had been up 11.4 percent so far this month.

The warning comes ahead of the government's annual economic planning meeting and could foreshadow more measures to reduce liquidity in the months ahead.

In Britain, Lloyds Banking Group PLC shares rose even though it confirmed it is planning to raise a British record of 13.5 billion pounds ($22.3 billion) via a rights issue in order to shore up its capital position and not take part in the government's Asset Protection Scheme.

The rights issue has been priced at 37 pence, which is a 60 percent discount to Monday's closing share price.

Even so, Lloyds shares were up 1.4 percent at just below 93 pence a share.

Elsewhere in Asia, Hong Kong's Hang Seng index slid 348.25, or 1.5 percent, to 22,423.14 on weakness in Chinese financial stocks. Bank of China slumped 4 percent.

Japan's Nikkei 225 stock average dropped 96.10, or 1 percent, to a fresh four-month low of 9,401.58.

South Korea's Kospi dropped 0.8 percent to 1,606.42 and Australia's S&P/ASX 200 index declined 0.7 percent to 4,685 on losses in banks and miners. Markets in Singapore and Thailand also fell.

Oil slipped to near $77 a barrel amid mixed signs about crude demand. Benchmark crude for January delivery was down 21 cents to $77.35 a barrel. The contract rose 9 cents to settle at $77.56 on Monday.

In currencies, the dollar fell 0.6 percent to 88.40 yen while the euro rose 0.1 percent to $1.4978.

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AP Business Writer Stephen Wright in Bangkok contributed to this report.

2009-11-24 08:57:08