Asia Stocks Edge Up, Europe Falls

Most Asian stock markets closed modestly higher on relief that China’s main index has stabilized after sharp drops Monday, but gains were limited as investors worried that Beijing may cut down on stimulus spending.

In Europe, the mood was not helped by data showing unemployment in the 16 nations that use the euro rose to 9.5 percent in July from 9.4 percent the previous month despite recent upbeat economic indicators. The unemployment data reminded investors that consumer spending — the basis for many companies’ profits — could remain weak for some time.

European markets dropped Tuesday and Wall Street futures pointed lower as investors worried stocks are overvalued and that an economic recovery will be only gradual.

In Germany, the DAX fell 74.12 points, or 1.4 percent, at 5,390.49, while Britain’s FTSE 100 dropped 58.28 points, or 1.2 percent, to 4,850.62. In France, the CAC-40 lost 31.48 points, or 0.9 percent, to 3,622.06.

Wall Street was expected to slide on the open. Dow Jones industrial average futures fell 57 points, or 0.6 percent, to 9,429.00 while Standard & Poor’s 500 index futures fell 6.90, or 0.7 percent to 1,012.80.

Jennifer McKeown, economist at Capital Economics, said that while the rise was moderate, “as unemployment tends to lag behind developments in the wider economy, we still expect to see further increases in the coming quarters.”

“Accordingly, the recent recovery in consumer spending may not be sustained.”

That view has hurt stock markets this week, as investors fret that the gains accumulated since March may have left equities overpriced, even considering the improving economic data.

“Markets are still looking for clues to the likely shape of recovery,” said Mitul Kotecha, analyst at Calyon.

“It still appears that a gradual rather than rapid recovery is in the offing. Either way, stock markets have run out of fuel.”

Some momentum might come from U.S. data on manufacturing. The Institute for Supply Management, a trade group of purchasing executives, is expected to report that American manufacturing grew in August for the first time in 18 months.

In Asia, most markets rebounded modestly, with China’s key index edging up after tumbling the previous day.

Monday’s drop in Shanghai’s volatile market triggered a wave of selling in markets around the world. But Tuesday the mood was steadier in Asia, helped by data showing that China’s manufacturing growth accelerated in August to its fastest rate this year.

“Panic selling has stopped, at least for today,” said Francis Lun, general manager of Fulbright Securities Ltd. in Hong Kong. “Investors are trying to regain direction after yesterday’s sell-off.”

The Shanghai Composite Index rose 15.98 points, or 0.6 percent, to close at 2,683.72, following a 6.7 percent plunge Monday that took it to its lowest level in three months.

Hong Kong’s Hang Seng climbed 0.8 percent to 19,872.30, while Tokyo’s Nikkei 225 stock average rose 0.4 percent to 10,530.06.

Markets also rose in South Korea, Taiwan, Singapore and Australia, but fell in India, the Philippines and New Zealand.

Chinese investors remained jittery after seeing shares drop nearly 10 percent in the previous two sessions on heavy selling of big company shares due to fears the government might pull back on the lavish bank lending that has helped push prices sharply higher this year.

Added to that is the perennial worry that new shares might flood the markets as lockup periods expire and companies launch more initial public offerings. The combination would mean less money to chase more stocks.

“The market is too weak to attract fresh cash, while investors with shares in hand can’t wait to sell out. This will last a while, not just a few days,” said Qian Qimin, a strategist at Shenyin Wanguo Securities, in Shanghai.

The Shanghai benchmark is still about 50 percent higher so far this year, but it has fallen sharply after surging more than 80 percent by Aug. 4. Some have dubbed the bleak weeks since then “Black August.”

Oil rose slightly, with benchmark crude for October delivery up 18 cents to $70.14 a barrel in electronic trading on the New York Mercantile Exchange.

In currencies, the dollar rose to 93.12 yen from 92.94 yen late Monday in New York. The euro fell to $1.4317 from $1.4327.

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Associated Press Writer Elaine Kurtenbach in Shanghai contributed to this report.

9/1/2009 8:41 AM CARLO PIOVANO, AP Business Writer LONDON