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World markets steady ahead of stress test results

World markets steady ahead of stress test results

World stock markets were mostly little changed Tuesday as investors awaited details of which U.S. banks will need more capital, though Britain's FTSE 100 index surged as it played catch-up after being closed the day before when investors reaped big gains.
In Europe, the FTSE was up 106.27 points, or 2.5 percent, at 4,349.49, while Germany's DAX fell 18.17 points, or 0.4 percent, to 4,884.28. France's CAC-40 was up 7.64 points, or 0.2 percent, at 3,245.61.
Wall Street gave some recent gains at the open as the U.S. government's stress tests into 19 leading banks _ results of which are due by Thursday _ are expected to show that several banks need more capital. The Dow Jones industrial average was down 13.30 points, or 0.2 percent, at 8,413.44 while the Standard & Poor's 500 dropped 4.65 points, or 0.5 percent, to 902.59.
Reports have surfaced indicating that Citigroup Inc., Bank of America Corp. and Wells Fargo & Co., as well as a handful of regional banks, will be among that group.
On Tuesday, the Wall Street Journal said about 10 of the 19 banks undergoing the tests will be required to boost their capital levels as a buffer against potential future losses. The report cited several unidentified people familiar with the matter.
Regulators have said no large institution will be allowed to fail, and have pledged government funds if necessary. Though some investors are worried the report could indicate more pain in the industry than previously thought, many analysts say results of the tests are largely priced into the market already.
The losses Tuesday represent a modest dent on the recent uptick, which has been fueled by mounting hopes that the global economy may start to recover later this year. In particular a run of better than expected U.S. economic data have indicated that the worst of the recession in the world's largest economy may have run its course.
Stock markets usually rally around six to nine months before real evidence of an economic recovery.
"The recovery trade continues to dominate the financial markets as the latest economic data confirms that the economy is in transition," said Steven Ricchiuto, chief economist at Mizuho Securities.
While London was closed Monday for a public holiday, markets around the world racked up big gains again, most notably in Asia where some actually jumped over 5 percent and the U.S., where the S&P 500 spiked 3.4 percent and moving the index into positive territory for 2009.
However, many analysts think the markets may be overestimating the speed and scale of the economic rebound in the wake of the slight improvements seen in the economic news over recent weeks.
"Equity investors are rather like travelers lost in the desert," said Stephen Lewis, an analyst at Monument Securities.
"They come across a discarded water-bottle in the sands and are delirious with joy when they find they can squeeze out a few drops of liquid to slake their thirst," he added.
Attention later will turn to U.S. Federal Reserve Chairman Ben Bernanke, who will testify before Congress about the Fed's strategy to get banks lending freely again and stimulate the economy. He is likely to point to the fact that the three-month dollar interbank lending rate fell below 1 percent for the first time ever earlier as a sign that the Fed's aggressive stance is beginning to reap dividends.
Earlier in Asia, Hong Kong's benchmark Hang Seng index flitted in and out of positive territory to end the day up 49.03 points, or 0.3 percent, at 16,430.08. Mainland China's benchmark Shanghai Composite Index also edged up 0.3 percent to a nine-month high close of 2,567.34, as property shares fed expectations that the economy may be poised for recovery.
Australia's main index climbed 0.2 percent to 3,890.40, while Singapore's Straits Times index rose 2.3 percent.
Financial markets in Japan, South Korea and Thailand were closed for national holidays.
Oil prices were steady with benchmark crude for June delivery down only 2 cents to $54.45 in electronic trading on the New York Mercantile Exchange.
In currencies, the dollar was unchanged at 98.85, while the euro fell to $1.3384 from $1.3419.
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AP Business Writer Elaine Kurtenbach in Shanghai contributed to this report.


Updated : 2021-05-09 07:56 GMT+08:00