Europe uncertainty saps market strength

LONDON (AP) ? Uncertainty over Europe's debt problems and global growth kept a lid on financial markets on Tuesday.

Spain is due to unveil this week a new series of cost-cutting measures and structural reforms that could pave the way for a demand for financial aid from its fellow eurozone countries.

But hopes that Madrid will apply for the aid were overcome by concern that it was delaying the move. Spain has been reluctant to ask since such assistance comes with strings attached.

"We still have a big overhang from Europe. The big question is whether Spain will ask for a bailout," said Andrew Sullivan, principal sales trader at Piper Jaffray in Hong Kong.

Another key issue is whether eurozone countries will grant Greece more time to reach its deficit reduction targets. The country also needs to finalize a package of austerity measures but political leaders are struggling to compromise as popular anger increases.

By late morning in Europe, Britain's FTSE 100 was down 0.1 percent to 5,835.15 while Germany's DAX fell 0.4 percent to 7,383.62 and France's CAC-40 dropped 0.5 percent to 3,480.28.

Wall Street appeared headed for a flat opening, with Dow Jones industrial futures narrowly lower at 13,486. S&P 500 futures were down almost 0.1 percent at 1,450.80.

Also weighing on financial markets this week has been evidence of a broad-based slowdown in the world economy. While Europe is sliding toward recession, the U.S. and Chinese economies ? the world's two largest ? are struggling.

Credit ratings agency Standard & Poor's on Tuesday lowered its growth forecasts for the eurozone. It expects a 0.8 percent contraction this year and no growth in 2013. The biggest source of concern, it said, was Spain and Italy. It forecasts a 1.4 percent contraction in Spain next year, more than twice the 0.6 percent drop it earlier estimated.

"Recent economic indicators continue to paint a bleak picture for Europe," said Jean-Michel Six, S&P chief economist for Europe, the Middle East and Africa.

The concerns over growth have offset the optimism markets enjoyed in recent weeks, when central banks in the U.S., Japan, Britain and Europe provided new measures to boost the economy or steady markets.

Markets may get some respite later in the day when the S&P/Case-Shiller index of U.S. home prices is released. Recent reports on U.S. home sales have shown a recovery in the sector, which is crucial to a sustainable recovery in the economy.

Earlier, in Asia, trading was uneven. Japan's Nikkei 225 index zigzagged throughout the day until closing 0.3 percent higher at 9,091.54.

Hong Kong's Hang Seng was marginally higher at 20,698.68. South Korea's Kospi lost 0.6 percent to 1,991.41. Australia's S&P/ASX 200 shed 0.3 percent to 4,372.90.

Mainland China's Shanghai Composite Index lost 0.2 percent to 2,029.29. The Shenzhen Composite Index fell 0.6 percent at 835.51. But benchmarks in Singapore, Indonesia, India, New Zealand and Thailand rose.

Among individual stocks, Taiwan's Foxconn Technology Co. fell 2.9 percent. The company, which manufactures Apple's iPhones, resumed production at a factory in northern China that employs 79,000 people after unrest on Sunday.

In currency markets, the euro fell to $1.2914 from $1.2935 in late trading Monday while the dollar was down at 77.70 yen from 77.86 yen.

Benchmark crude for November delivery was up 50 cents to $92.43 a barrel in electronic trading on the New York Mercantile Exchange. The contract fell 96 cents to settle at $91.93 on Monday.

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Pamela Sampson in Bangkok contributed to this report.

Source: http://news.yahoo.com/europe-uncertainty-saps-market-strength-104836180--finance.html

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