World stocks mixed on Fed hopes

World stock markets mixed as investor believe the Fed will maintain stimulus program

Associated Press
World stocks mixed on Fed hopes
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A man looks at an electronic stock board outside a securities firm Monday, June 3, 2013, in Tokyo. Uncertainty about the U.S. Federal Reserve's next course of action and a sharp, sudden plunge on Wall Street sent Asian stock markets lower Monday. Japan’s Nikkei 225 index lost 2.2 percent to 13,475.64, echoing U.S. stock markets losses Friday. The Dow dropped more than 200 points, its worst drop in six weeks. (AP Photo/Junji Kurokawa)

BANGKOK (AP) -- World stocks remained volatile Tuesday, after a disappointing U.S. manufacturing report lifted the mood of investors who believe negative economic news makes it more likely that the Federal Reserve will maintain its aggressive monetary stimulus program.

European stocks rose in early trading, while Japan's Nikkei 225 index clawed back some of its prior session losses with a 2.1 percent gain to close at 13,533.76. Those gains were partly due to investors who believe the Fed program has been a chief reason why stocks have rallied this year.

Speculation about the Fed's intentions regarding its quantitative easing program, dubbed QE, has caused sharp swings in stock markets recently. The Fed buys $85 billion a month in government bonds, which translates into lower interest rates. That, in turn, makes stocks more attractive to investors seeking higher returns.

Worries that the good times might end if the Fed pulls the QE plug sent Asian stocks plummeting on Monday. But the weaker-than-anticipated U.S. manufacturing survey released later in the day led investors to conclude it is more likely that the Fed would continue with QE.

Analysts warned that a cautious approach was best.

"Equities running on poor data is not something that can be sustained over the long term. Poor data means underlying support for equity markets is diminishing," said Mitul Kotecha of Credit Agricole CIB in Hong Kong.

Britain's FTSE 100 rose 0.7 percent to 6,572.81. Germany's DAX advanced 0.5 percent to 8,326.26. France's CAC-40 gained 0.5 percent to 3,941.66. Wall Street, however, appeared headed lower, with Dow Jones industrial futures falling less than 0.1 percent to 15,207. S&P 500 futures also fell marginally, to 1,635.20.

Mainland Chinese shares fell for a fourth straight day. The Shanghai Composite Index fell 1.2 percent to 2,272.42, its biggest loss in more than a month. The smaller Shenzhen Composite Index declined 2 percent 1,007.09. Shares in biotechnology, media and shipping-related companies weakened.

Australia's S&P/ASX 200 rose 0.3 percent to 4,900.80. Hong Kong's Hang Seng was nearly unchanged at 22,285.52. South Korea's Kospi was also flat at 1,989.51. Benchmarks in Indonesia and Thailand rose while those in Singapore, Taiwan and the Philippines fell.

Benchmark oil for July delivery fell 53 cents to $92.94 per barrel in electronic trading on the New York Mercantile Exchange. The contract rose $1.48 to close at $93.45 per barrel on the Nymex on Monday.

In currencies, the euro fell to $1.3073 from $1.3076 late Monday in New York. The dollar rose to 100.24 yen from 99.45 yen.

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Researcher Fu Ting contributed from Shanghai.

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