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Global markets down as rally runs out of steam on profit taking

Global markets down as rally runs out of steam on profit taking
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First Published: Tue, May 12 2009. 12 04 AM IST

 In the red: Investors monitor stock prices at an exchange in Shanghai. The Shanghai Composite dropped 1.8% to 2,579.78 points on Monday. Qilai Shen / Bloomberg
In the red: Investors monitor stock prices at an exchange in Shanghai. The Shanghai Composite dropped 1.8% to 2,579.78 points on Monday. Qilai Shen / Bloomberg
Updated: Tue, May 12 2009. 12 04 AM IST
Hong Kong: Global stock markets retreated on Monday, breaking several days of gains, as positive news of fewer job losses in the US was blunted by investors moving to book recent profits.
In the red: Investors monitor stock prices at an exchange in Shanghai. The Shanghai Composite dropped 1.8% to 2,579.78 points on Monday. Qilai Shen / Bloomberg
Most Asian markets closed down, with white-hot Chinese and Hong Kong shares giving back all their gains from early in the session and then some. Crude oil prices and the dollar both slid.
The region’s investors were emboldened early in the day by the latest dose of less dreary news: a key monthly job report showing the world’s largest economy shed 539,000 jobs last month—the lowest in six months. The reading amounted to far fewer than forecast, feeding a popular theme of economic recovery that’s driven world markets sharply higher since early March.
But many analysts say recent improvements in the economy may not justify the swift rise in equity prices of late. They say the rally is being fuelled in part by hot money flowing from mutual funds and other big investors that could delay a major correction for weeks or months, but isn’t the stuff of lasting bull runs.
“The markets are becoming overbought. The fundamentals of the economy just don’t support these levels, so we’re seeing some profit taking,” said Peter Lai, investment manager at DBS Vickers in Hong Kong.
European markets opened lower with UK’s FTSE 100 down 1.1%, Germany’s DAX off 1.4% and France’s CAC-40 losing 1.5%.
Wall Street looked to give back some of its gains after US futures fell. Dow futures fell 94 points, or 1.1%, to 8,422, while S&P 500 futures were down 12.7, or 1.4%, to 912.
In Asia, Japan recouped losses and closed higher, with the Nikkei up 19.15, or 0.2%, to 9,451.98, as hopes for a global economic recovery eclipsed disappointment over a stream of poor corporate earnings. Weighing on the broader market were auto manufacturers, after Toyota Motor Corp. reported its worst ever annual loss—and forecast an even bigger loss this year. Toyota shares fell 4.8%.
Chinese shares, meanwhile, snapped a six-session winning streak as the benchmark Shanghai Composite dropped 1.8% to 2,579.78. That dragged on Hong Kong’s Hang Seng, off 301.92, or 1.7%, to 17,087.95, after climbing nearly 2% early in the day.
Investors in China were watching for a chance to take profits after the recent rally, though prices initially rose after the government reported that the country’s main inflation barometer fell 1.5% in April from a year earlier, in line with expectations.
The data, along with reports that bank lending may have fallen from record levels, dashed hopes for another interest rate cut, analysts said.
Elsewhere, South Korea’s Kospi gained 0.2% and Taiwan’s benchmark rose 1%.
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First Published: Tue, May 12 2009. 12 04 AM IST