LONDON ? China's move to clamp down on lending and dampen inflation weighed on stocks Friday, while European investors worried that renewed debt market tensions will force Portugal to require a financial rescue in coming months.
China's increase in the required reserve ratio by 0.5 percentage points is the fifth since October as the monetary authorities try to cool the economy and keep a lid on inflation. China's policies are crucial to markets because rising demand in the country has been the motor of world economic growth during the global financial crisis.
"A relatively quiet trading session sparked into life when China hiked its required reserve ratio for the second time this year," said Chris Walker, an analyst at UBS. "Risk sentiment inevitably suffered slightly."
By mid afternoon, Britain's FTSE 100 was down 0.4 percent to 6,061 while France's CAC-40 fell 0.1 percent to 4,147. Germany's DAX bucked the trend, rising a modest 0.1 percent to 7,413.
On the U.S., the Dow Jones industrial average was down a little over 4 points at 12,314 soon after the open while the broader S&P 500 futures fell less than a point to 1,340.
Aside from China's latest policy tightening, investors are also keeping a close watch on developments in Europe's debt crisis as Portugal's bond yields to near euro-era records.
Eurozone ministers are expected to agree to an increased bailout fund starting in 2013, but analysts say that the crisis response ? EU leaders are expected to present a "comprehensive solution" on March 11 ? may underwhelm.
Crucially, that means Portugal might require a bailout like Greece and Ireland before.
"If there were another domino to fall, Portugal might be it," said Athanasios Vamvakidis, a forex strategist at Bank of America Merrill Lynch.
He noted that Portugal's borrowing costs are now at a level that will likely prove too high.
"Beyond debt sustainability concerns, the lower IMF-EU borrowing cost should look increasingly attractive to Portugal," Vamvakidis said.
The uncertainty over Portugal's fate kept a lid on the euro, which was trading flat on the day at $1.3620.
Meanwhile, the Group of 20 summit kicked off in Paris, though expectations for the outcome were low. French Finance Minister Christine Lagarde said the main goal is to find the right tools to measure global economic imbalances, which many economists say contributed to the world's financial meltdown.
Analysts say concrete results are unlikely due to defiance by countries like China and Germany, who export and save, to adjust their economic policies. Germany has repeatedly said that trade surpluses should not be targeted and that it is the burden of countries with deficits ? who borrow and spend ? to make their economies more competitive.
Indexes in Asia, which closed before China's announced policy tightening, performed much better thanks to momentum from the U.S. the previous day ? the Dow closed Thursday at its highest level since June 2008.
Japan's Nikkei 225 stock average rose 6.16 points to close at 10,842.80 ? ending at a 10-month high for the fifth session in a row.
South Korea's Kospi jumped 1.8 percent to 2,013.32. Benchmarks in Taiwan, Singapore and New Zealand also advanced.
Meanwhile, China shares struggled amid the release of newly calculated data that showed property prices rose in most cities in January despite renewed efforts to cool the overheated market.
The benchmark Shanghai Composite Index dropped 0.9 percent to 2,899.79 while the Shenzhen Composite Index for China's smaller, second market was down 1 percent at 1,273.42.
Benchmark crude for March delivery was up 44 cents at $86.80 a barrel in electronic trading on the New York Mercantile Exchange.
___
Carlo Piovano in London and Pamela Sampson in Bangkok contributed to this report.
Powered By iWebRSS.com
