World stocks down, Nikkei falls as yen slide halts

Jan 16, 2013, 6:19 AM EST
A man watches an electric price display of a securities firm in Tokyo, Wednesday, Jan. 16, 2013.
(AP Photo/Shizuo Kambayashi)

BANGKOK (AP) — Japan's benchmark stock index toppled off a 32-month high Wednesday after the yen's slide went into reverse. Other benchmarks were lower as investors began focusing on the political impasse in Washington over the U.S. government's borrowing limit.

The Nikkei 225 in Tokyo tumbled 2.6 percent to close at 10,600.44 after government minister Akira Amari aired concerns about the recent rapid weakening of the yen, which can hurt consumers by raising the cost of imported goods, Kyodo News Agency reported.

European benchmarks fell in early trading. Britain's FTSE 100 lost 0.3 percent to 6,098.92. Germany's DAX shed 0.1 percent to 7,665.90 and France's CAC-40 lost less than 0.1 percent to 3,695.01.

Wall Street also appeared headed for losses, with Dow Jones industrial futures losing 0.2 percent to 13,437 and S&P 500 futures retreating 0.2 percent to 1,462.50.

The day's lukewarm trading started in Asia. Hong Kong's Hang Seng fell 0.1 percent to 23,356.99. South Korea's Kospi fell 0.3 percent to 1,977.45. Australia's S&P/ASX 200 was one of the few advancers, up 0.5 percent to 4,73840. Benchmarks in Taiwan, Thailand and the Philippines also fell, while Singapore rose.

Traders are increasingly nervous about a brewing fight in Washington over raising the U.S. debt ceiling so that the government can keep borrowing money to pay its bills. The U.S. Treasury says it will run out of money to pay all the government's obligations sometime in February or March if Congress doesn't raise the current $16.4 trillion limit on borrowing.

Republicans lawmakers say they will demand major spending cuts in exchange for any agreement to raise the debt limit. But President Barack Obama has said he won't negotiate on the debt limit.

"It seems that buyers are getting a bit cautious about pushing things higher before clarification on the debt ceiling," said Ric Spooner, chief market analyst at CMC Markets in Sydney.

The U.S. fiscal crisis is the biggest single individual risk facing investors, with 37 percent of investors naming it as the biggest worry, according to a survey of fund managers published by Bank of America Merrill Lynch on Tuesday. The European debt crisis was cited as the biggest concern by 23 percent of those polled and a "hard landing" for the Chinese economy was third on the list with 12 percent.

The Nikkei index finished at 10,879.08 on Tuesday, its highest close in nearly three years, after Bank of Japan Gov. Masaaki Shirakawa pledged to take action to combat the country's deflationary slump.

The yen has slid against the U.S. dollar and euro since the Liberal Democratic Party returned to power in national elections last month. Its leader, Shinzo Abe, has been lobbying the central bank for aggressive action to end Japan's years of deflation and has announced a 20 trillion yen ($225 billion) economic stimulus package.

On Tuesday, Germany's main stock index, the DAX, fell after the government said the economy grew only 0.7 percent in 2012, indicating activity dropped in the last three months of the year by as much as 0.5 percent. The figures show the European financial crisis is weighing down even the strongest economies on the continent.

Analysts at DBS Bank Ltd. in Hong Kong said Germany's slowdown was bad news for struggling euro countries since Germany "is the country that is supposed to be the economic engine and banker to Europe all rolled into one."

Benchmark oil for February delivery was up 7 cents to $93.36 per barrel in electronic trading on the New York Mercantile Exchange. The contract dropped 86 cents to finish at $93.28 a barrel in New York on Tuesday.

In currencies, the euro fell to $1.3267 from $1.3299 late Tuesday in New York. The dollar fell to 87.95 yen from 88.83 yen.


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