World stocks waver amid Japan credit downgrade

BANGKOK—World stock markets wavered Wednesday after Moody’s downgrade of Japan’s credit rating and weak US home sales figures offset positive sentiment from a day of big gains on Wall Street.

Oil prices hovered below $85 a barrel amid mixed signs about the strength of demand for crude. In currencies, the dollar was lower against the euro and the yen.

European shares were higher in early trading. Britain’s FTSE 100 rose fractionally to 5,131.95. Germany’s DAX was 0.2 percent higher at 5,544.87 and France’s CAC-40 rose 0.3 percent to 3,097.62.

Wall Street appeared to be headed lower. Dow Jones industrial futures were down 0.9 percent at 11,036, while S&P 500 futures fell 1 percent to 1,147.20.

The mixed picture followed a day mostly of losses in Asia.

Japan’s Nikkei 225 index fell 1.1 percent to close at 8,639.61 after opening higher early Wednesday. South Korea’s Kospi drooped 1.2 percent to 1,754.78. Hong Kong’s Hang Seng tumbled 2.1 percent to 19,466.79.

Australia’s S&P/ASX 200 fell 0.1 percent to 4,167.60 after spending much of the session in positive territory. Markets in Singapore, Taiwan and Indonesia also fell.

Mainland Chinese shares were mixed with the benchmark Shanghai Composite Index falling 0.5 percent to 2,541.09 while the Shenzhen Composite Index edged 0.1 percent higher to 1,144.74. Shares in travel, food and drink-related companies led the gains in anticipation of a surge in demand during upcoming holidays. Shares in cement and real estate companies weakened on worries over more housing cooling measures.

The sluggishness of Asian markets came as a bit of a surprise to some following strong buying momentum on Wall Street on Tuesday.

“I am quite surprised most of Asia is down because we had a powerful rally on Wall Street,” said Dariusz Kowalczyk of Credit Agricole in Hong Kong. “But somehow, we are seeing some risk aversion. It may be related to the fact that there are declines in regional currencies and perhaps foreign investors are continuing to withdraw funds from the region.”

He also said negative data about new home sales in the US on Tuesday may have rattled investor nerves in Asia.

“Perhaps Asian investors have concluded that when the outlook for the US is not that good, the outlook is not that good for Asia either,” Kowalczyk said.

Sentiment was also dented after Moody’s Investors Service downgraded Japan’s credit rating to Aa3 from Aa2, citing weak growth prospects for the world’s No. 3 economy, massive government debt and constant political uncertainty. The new rating is three notches below Moody’s top Aaa rating.

The downgrade, which puts Moody’s rating in line with other major credit rating agencies, is the latest blow for Japan after its economy remained mired in recession in the second quarter due to tumbling factory production and exports following the March 11 earthquake and tsunami.

Mining shares sank after prices for gold and some other metals slipped Tuesday. Rio Tinto Ltd. lost 1.7 percent in Sydney. Australia’s Newcrest Mining Ltd. was 0.4 percent down. Zijin Mining Group, China’s largest gold miner, lost 1.6 percent.

Australia’s Macarthur Coal Ltd. rose 1.2 percent after announcing it had nearly doubled its full year profit and repeated its advice to shareholders to reject a takeover offer from U.S energy giant Peabody Energy Corp. and Luxembourg-based steelmaker ArcelorMittal.

Meanwhile, Hong Kong-listed China Life Insurance Co., the country’s biggest life insurer, plummeted 11.6 percent after announcing its first-half profit fell 28 percent from a year earlier as premium growth slowed and claims rose. Ping An Insurance Co. of China also fell. It was down 3.7 percent.

In New York on Tuesday, buyers returned to the stock market, searching for bargains on the heels of better-than-expected manufacturing activity out of China and hopes that Federal Reserve Chairman Ben Bernanke may unveil new steps to help the economy when he speaks at an annual economic conference later this week in Wyoming.The Dow Jones industrial average closed with a gain of 3 percent at 11,176.76. Indexes that track smaller stocks did even better, a sign that investors were more willing to take on risk. The S&P 500 index rose 3.4 percent to 1,162.35. The Nasdaq composite, which tracks mainly technology companies, rose 4.3 percent to 2,446.06.

Benchmark oil for October delivery was down 47 cents to $84.97 a barrel in electronic trading on the New York Mercantile Exchange. Crude rose $1.02 to finish at $85.44 on Tuesday.

In London, Brent crude for October delivery was down 17 cents to $109.12 on the ICE Futures exchange.

In currencies, the euro rose to $1.4433 from $1.4423 in late trading Tuesday in New York. The dollar fell to 76.56 from 76.66 yen.