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Markets weak on 5-year credit crunch anniversary

Pan Pylas, AP Business Writer

LONDON (AP) -- Financial markets were lackluster on Thursday — what many consider the fifth anniversary of the start of the global credit crisis — despite positive U.S. jobs figures and hopes that China's monetary authorities will do more to shore up economic growth in the world's second largest economy.

After a run of positive days, investors were reluctant to keep buying riskier assets, such as stocks and the euro, despite a run of Chinese economic indicators that cemented expectations Beijing will ease monetary policy to boost growth.

With inflation in China falling to 1.8 percent in July from the previous month's 2.2 percent, analysts say the country's authorities have room to maneuver. Separate figures on industrial production and retail sales confirmed the slowdown.

"Normally, the prospect of stimulus in China gets investors fairly excited, but today the reaction has been more muted," said Chris Beauchamp, market analyst at IG Index.

In Europe, Germany's DAX was down 0.2 percent at 6,950 while the CAC-40 in France rose 0.3 percent to 3,447. The FTSE 100 index of leading British shares was 0.1 percent higher at 5,852.

In the U.S., a 6,000 decline in weekly jobless claims gave stocks a little push higher, but not much — the Dow Jones industrial average was up 0.1 percent at 13,193 while the broader S&P 500 index rose 0.2 percent to 1,405.

The unremarkable performance in stock markets contrasts with what occurred five years ago, when French bank BNP Paribas closed two funds exposed to U.S. subprime mortgages, alarming global banks, who stopped lending to each other. The credit freeze became so bad that day that the European Central Bank pumped €95 billion into financial markets to free up the flow of capital between banks.

That failed to calm markets, as did numerous liquidity injections and interest rate cuts in the following months. A year later, the credit crunch eventually led to the collapse of Lehman Brothers that triggered the deepest global recession since World War II.

"It's hard to believe that it's five years ago today that the financial world started to appreciate the magnitude of the problems that would be the soundtrack to our lives over the last five years," said Jim Reid, an analyst at Deutsche Bank.

The period has proved to be one of the most dramatic and volatile periods for financial markets since the stock market crash of 1929. Most stock indexes are still far below the peaks they hit in the summer of 2007.

By contrast, returns on so-called safe haven investments — such as government bonds from the U.S., Germany and Britain, as well as precious metals like gold — have been strong as investors sought to protect their capital.

The effects of that crisis are still being felt far and wide, with the world's largest economies facing differing degrees of financial trouble. In Europe, the debt crisis shows few signs of abating despite hopes that the European Central Bank is readying a new strategy to lower the borrowing rates of Spain and Italy. Policymakers in the U.S. and China are grappling with how to kickstart growth, albeit at sharply different levels.

Hopes that the ECB will play a more active role in fighting Europe's debt crisis have shored up markets for the best part of two weeks. Stocks have enjoyed one of their best runs in months, while the euro has clambered off near two-year lows against the dollar and oil prices have pushed back above the $90 a barrel mark. On Thursday, the euro was trading 0.5 percent lower at $1.23.

Unemployment figures out of Greece highlighted the human cost of the financial crisis — 23.1 percent of the working population were without a job in May. A startling 53.9 percent of under 25s were unemployed. Even worse figures are expected in the coming months as Greece remains mired in a five-year recession and the government contemplates another round of big spending cuts to meet demands of international creditors.

Earlier in Asia, Japan's Nikkei 225 rose 1.1 percent to close at 8.978.60. During the session, the Nikkei had surpassed the 9,000 level for the first time since July 6.

South Korea's Kospi jumped 2 percent to 1,940.59. Hong Kong's Hang Seng added 1 percent to 20,269.47. On the Chinese mainland, the Shanghai Composite Index rose 0.6 percent to 2,174.10. The smaller Shenzhen Composite Index added 1.5 percent to 909.69.

Oil prices advanced further, with the benchmark rate up 48 cents at $93.83 a barrel.