World stocks mixed after Spain gets downgrade
BANGKOK -- World stock markets were mixed Thursday, with Europe posting modest gains while Asia slumped after Spain, the fourth-largest euro economy, was slapped with a two-notch credit downgrade.
Standard & Poor's downgraded Spain's debt late Wednesday from BBB+ to BBB-, the lowest investment-grade level. S&P said the action was due to the country's recession, high unemployment and social unrest, which limit the government's options for reversing the country's financial crisis.
But any angst produce by the ratings cut had worn off by the time European markets opened. Britain's FTSE 100 rose 0.2 percent to 5,791.79, Germany's DAX added 0.4 percent and France's CAC-40 advanced 0.3 percent to 3,375.40.
Wall Street also was poised for modest gains, with Dow Jones industrial futures rising 0.2 percent to 13,290 and S&P adding 0.3 percent to 1,429.90 ahead of the opening bell.
Hours after Spain's downgrade, South Korea's central bank cut its benchmark interest rate and lowered economic growth forecasts for this year and next _ another sign of a worsening global slowdown.
The turbulence dragged Asian stocks lower. Japan's Nikkei 225 index fell 0.6 percent to finish at 8,546.78. South Korea's Kospi shed 0.8 percent to 1,933.09. Australia's S&P/ASX 200 lost 0.2 percent to 4,483.50.
Hong Kong's Hang Seng, however, rose 0.4 percent to 20,999.05. Mainland Chinese shares lost ground, with the Shanghai Composite Index shedding 0.8 percent to 2,102.87 while the Shenzhen Composite Index lost 1.5 percent to 867.21.
On Tuesday, the International Monetary Fund reduced its growth forecast for the world economy to 3.3 percent this year from 3.5 percent. Its forecast for growth in 2013 is 3.6 percent, down from 3.9 percent three months ago and 4.1 percent in April. Global growth concerns are weighing heavily on market sentiment.
"From here on in, it's going to be a matter of how much economic or corporate earnings growth there is. And the outlook for that is still pretty flat, as evidenced by what the IMF is saying," said Ric Spooner, chief market analyst at CMC Markets in Sydney.
Spain presented yet another deeply worrying problem. Last month, the European Central Bank agreed to buy unlimited amounts of the government bonds of struggling European countries such as Spain to help lower their borrowing costs. But the governments first need to apply for a bailout.
Spain has not applied for a bailout. Instead, the government has introduced a series of austerity and labor measures in a bid to bring down its budget deficit and convince investors it can manage its finances without outside help.
"The slow progress towards a sovereign bailout for Spain will have likely played a role in the (S&P) decision, a factor that is also weighing on general market sentiment," analysts at Credit Agricole CIB in Hong Kong said in a market commentary. "The debt downgrade may on the margin increase the pressure on the Spanish government to request a formal bailout."
Among individual stocks, Toyota Motor Corp. fell 1.4 percent after the company was forced to recall 7.4 million cars from around the world due to faulty power window switches.
Shares of Australia's Lynas Corp. plunged 15.1 percent after a Malaysian Court delayed the start of production at its rare earths processing plant to consider objections by environmentalists and other opponents of the project.
Hong Kong-listed Industrial and Commercial Bank of China, the world's biggest bank by market value, jumped 4.3 percent and Bank of China gained 2.7 percent after Central Huijin, the domestic investment arm of China's sovereign wealth fund, announced it would buy more shares of the four main banks.
Benchmark crude for November delivery was up 70 cents to $91.95 per barrel in electronic trading on the New York Mercantile Exchange. The contract fell $1.14 to finish at $91.25 per barrel on the Nymex on Wednesday.
In currencies, the euro fell to $1.2879 from $1.2897 late Wednesday in New York. The dollar fell to 78.02 yen from 78.19 yen.
AP researcher Fu Ting contributed from Shanghai.