London: European stock markets fell modestly on Monday as investors took a breather after ending last week on a positive note due to better than anticipated US jobs data. The figures helped Asian markets advance strongly earlier.
The FTSE 100 index of leading British shares was down 21.78 points, or 0.5%, at 4,709.78 while Germany’s DAX fell 35.78 points, or 0.7%, at 5,423.18. The CAC-40 in France was 20.57 points, or 0.6%, lower at 3,500.57.
In Asia, Tokyo’s Nikkei 225 stock average rose 112.17 points, or 1.1%, to a ten-month high of 10,524.26 after an unexpected surge in Japanese machinery orders, while Hong Kong’s Hang Seng jumped 554.15 points, or 2.7%, to 20,929.52, its best finish in about 11 months.
Jimmy Yates, a dealer at CMC Markets, said last week’s gains have seen many of the world’s major indexes cement their places above key technical levels, which should leave them well-placed for more gains going forward.
Last week, for example, the Dow Jones industrial average added 2.2% to hit a ten-month high while the broader Standard & Poor’s 500 index consolidated itself above the 1,000 mark after government figures showed that only 247,000 US jobs were lost in July, way less than expected, and the unemployment rate unexpectedly fell to 9.4%.
With little economic news due on Monday, investors may well take a breather. Dow futures were down 5 points, or 0.1%, at 9,320 while the S&P 500 futures fell 0.8 point, or 0.1%, to 1,005.60.
“As the week moves on we will see some more high level economic readings but for now it will be a case of taking stock of what was a pivotal week in the stock market recovery,” said Yates.
The coming week will likely be dominated by US retail sales data and a raft of earnings from retailers themselves, such as Wal-Mart Stores Inc., JC Penney Corp. and Estee Lauder Co.
Investors are fully aware that without the support of the US consumer, which accounts for around 70% of the US economy and 20% of the global economy, any recovery will soon fizzle out.
Daragh Maher, an analyst at Calyon Credit Agricole, said retail sales in the US should be boosted by the government-sponsored ’cash for clunkers’ subsidy to boost auto sales, though the underlying picture will be considerably less upbeat.
Investors are also awaiting the latest monetary policy decision from the US Federal Reserve on Wednesday.
Though no change in interest rates is expected, investors will be looking to see if the Fed sounds a note of cautious optimism in its accompanying statement and whether it has plans to expand its asset-purchasing program now that the funds are running dry.
Despite the relative dearth of economic news on Monday, some stocks were in the spotlight. Notably bailed-out British bank Lloyds Banking Group PLC slid 5% on a newspaper report it was planning a massive issue of shares to loosen the government’s grip, the government owns over 40% of the bank after last year’s injection of capital to keep it afloat.
Elsewhere, Australian and Taiwan markets gained while South Korea’s market closed little changed.
Shanghai’s benchmark edged lower amid continuing jitters that the rush of liquidity that’s driven China’s economy and markets over the last year might slow.
Meanwhile, oil prices gave up early gains, with benchmark crude for September exchanging hands at $70.63 a barrel, down 30 cents. The contract lost $1.01 on Friday.
The dollar fell 0.4% to 97.27 yen to 97.33 yen, while the euro rose 0.1% to $1.4193.