LONDON, Jan 13, (Agencies): European and US stock markets traded in narrow ranges Wednesday as sentiment continued to be dented by China’s moves to curb bank lending and by a relatively disappointing start to the US fourth quarter corporate earnings season.
Sentiment in Europe and the US has been weighed down all day by big losses in Asia after the Chinese authorities raised the proportion of deposits that banks must hold in reserve from next Monday by half a percentage point. The People’s Bank of China also raised the yield it is offering on its one-year bills, its second increase in interbank markets in a week.
China has helped support the global economy during the recession and investors are worried it may not be such a big motor of growth in the months ahead, especially if interest rates start to rise, too.
A fairly disappointing start to the fourth quarter US corporate reporting season from Alcoa Inc. earlier this week also continued to weigh on markets.
With economic data this week on the light side, attention will continue to focus on earnings statements to see if the increasing optimism on Wall Street, which has driven a ten-month bull run in stock markets, is justified by the fundamentals.
Key earnings statements on the horizon include those from Intel Corp., the world’s biggest chipmaker, on Thursday and Friday’s results from JP Morgan Chase & Co.

US
The stock market turned mostly higher Wednesday, following the lead of financial stocks as the heads of several big banks testified before US Congress about the financial crisis.
Stocks fluctuated for much of the morning but strengthened as the questioning of bank officials proceeded with little in the way of confrontation. Investors were being choosy, moving into consumer stocks in response to a higher profit forecast from Kraft Foods Inc. but selling energy stocks as the price of oil fell. Industries seen as safer in a weak economy, like health care and utilities, rose.
Executives including Goldman Sachs Group Inc. Chairman and CEO Lloyd Blankfein, JPMorgan Chase & Co CEO James Dimon, Morgan Stanley Chairman John Mack and Bank of American Corp. CEO Brian Moynihan appeared before the Financial Crisis Inquiry Commission. It is the first meeting of the bipartisan, 10-member panel, which is investigating the near collapse of the financial system in the fall of 2008.
While the executives agreed that banks’ actions contributed to the crisis that paralyzed the credit markets and worsened the recession, investors did not hear anything from the hearings that would encourage them to flee financial stocks.
Still, there is growing public discord over big profits and bonuses at financial companies that has the White House considering a levy on banks to cover about $120 billion in taxpayer losses from the government’s industry bailout. Opponents say it could jeopardize a recovery by the nation’s biggest banks. The questions about banks underscored how many concerns investors are juggling. After a strong first week of the year in stocks, a disappointing profit report from Alcoa Inc. late Monday is causing concern that the robust earnings investors had been expecting for the final quarter of 2009 might not materialize.
In much of 2009, companies boosted earnings by laying off workers and slashing expenses. But cost-cutting cannot be relied upon forever so investors are looking for signs that increases in revenue will lift earnings.
Europe
European stock markets closed mostly firmer on Wednesday, trading in narrow ranges as nervous investors waited for positive corporate earnings news to give sentiment a lift, dealers said.
They said news that China, a driving force for the global recovery, had started to tighten monetary policy dented confidence that the markets would simply extend the large gains from last year.
Investors know that governments at some point have to start withdrawing some of the stimulus measures taken to support their economies but are concerned that they may do it to soon or do too much, jeopardising any upturn, they said.
In London, the FTSE 100 index of leading shares fell 0.46 percent to 5,473.48 points. In Paris, the CAC 40 was virtually unchanged at 4,000.86 points while in Frankfurt, the DAX gained 0.34 percent to 5,963.14 points.
Dealers said China’s move hit Asian markets especially hard while disappointing results from aluminium giant Alcoa and oil major Chevron earlier in the week undercut confidence in further gains.
UK
Britain’s leading share index shed 0.5 percent on Wednesday as weakness in commodity and banking issues countered gains in selected defensive stocks, reflecting fading risk appetite among some investors.
At the close, the FTSE 100 was 25.23 points lower at 5,473.48, having lost 0.7 percent on Tuesday following China’s decision to tighten banks’ reserve requirements.
Energy issues were depressed for a second successive session, weighed down by sharp falls in the crude price, off 1.9 percent to below $79 a barrel after a US oil inventory report showed stockpiles rose last week.
Royal Dutch Shell was the worst off, down 1.8 percent as a number of analysts reduced their forecasts for the oil major’s fourth-quarter earnings. Morgan Stanley downgraded its rating for the Anglo-Dutch firm.
Peers BP, BG Group and Tullow Oil shed 0.3 to 1.1 percent.
Miners saw an earlier rally reversed with metal prices weaker again after China’s monetary tightening move on Tuesday, coupled with recent disappointing fourth-quarter earnings numbers from US aluminium producer Alcoa.
Gold miner Randgold Resources was the biggest FTSE 100 faller, down 2.8 percent, while Lonmin, Fresnillo, Xstrata, Vedana Resources, and Rio Tinto were off 0.5 to 2.0 percent.
Asia
Asian stock markets slid Wednesday amid worries that China’s move to curb its torrent of bank lending could slow the pace of recovery in other countries.
Losses were heaviest in Hong Kong and mainland China while benchmarks in other markets fell about 1.5 percent or less. Oil dropped to near $80 a barrel while the dollar was slightly higher against the yen and a tad lower versus the euro.
Also restraining buying appetite was disappointing earnings from U.S. aluminum giant Alcoa Inc. which raised more questions about whether the 10-month surge in global stock markets can be sustained.
Japan’s Nikkei 225 stock average was down 144.11 points, or 1.3 percent, at 10,735.03 and Hong Kong’s Hang Seng slid 510.08, or 2.3 percent, to 21,816.56. In mainland China, the Shanghai benchmark tumbled 3.1 percent to 3,172.12.
Elsewhere, South Korea’s Kospi shed 1.6 percent to 1,671.41, Singapore’s index fell 0.9 percent and Australia’s market retreated by 0.6 percent.
In Tokyo, shares of Japan Airlines dived 81 percent after a 45 percent nosedive the day before amid expectations a bankruptcy filing was imminent.
Japan
Japanese stocks retreated Wednesday, hit by worries that growth in China may cool and another dizzying nosedive by Japan Airlines.
The benchmark Nikkei 225 stock average lost 144.11 points, or 1.3 percent, to 10,735.03. The broader Topix index fell 1.1 percent to 944.02. Companies doing business in commodities and machinery fell particularly hard after China’s central bank announced credit-tightening measures Tuesday to slow the country’s red-hot economy. The People’s Bank of China ordered lenders to set aside more reserves and raised interest rates on one-year bills.
Construction equipment maker Komatsu Ltd finished down 2.9 percent at 2,036 yen. Nippon Steel Corp. dropped 3.3 percent to 382 yen, while rival JFE Holdings Inc. tumbled 5 percent to 3,580 yen.
Further dragging steelmakers was a ratings downgrade by Credit Suisse, which cut its assessment on the sector to “market weight” from “overweight.”
Investors continued to dump shares of Japan Airlines Corp, which plunged 81 percent to just 7 yen as the money-losing airline moved toward bankruptcy.
The Nikkei financial daily said Asia’s biggest airline was expected to file for bankruptcy protection as early as Jan 19 with its shares to be removed from the stock exchange. The issue shed 30 yen — the maximum one-day decline allowed in JAL’s stock — from Tuesday’s finish of 37 yen.
China
Chinese shares fell Wednesday on liquidity jitters after authorities raised bank reserves to control lending.
The benchmark Shanghai Composite Index dropped 101.31 points, or 3.1 percent, to close at 3,172.66. The Shenzhen Composite Index for China’s smaller second exchange shed 1.6 percent to 1,193.73.
Bank shares dived on profit concerns. China Construction Bank Ltd tumbled 5 percent to 5.86 yuan, while Industrial & Commercial Bank of China Ltd., China’s biggest commercial lender, declined by 4.7 percent to 5.09 yuan. Midsize lender Shenzhen Development Bank Ltd. tumbled 6.6 percent to 20.96 yuan.
Real estate shares lost ground on concerns that less lending might affect sales. Poly Real Estate Group, China’s second-largest developer, plunged by 4.1 percent to 20.43 yuan, while rival China Vanke Ltd lost 2.4 percent to 10.04 yuan.
Oil
World oil prices plunged on Wednesday in reaction to rising crude stockpiles in the United States, which indicated weak demand in the world’s biggest energy consuming nation, traders said.
New York’s main futures contract, light sweet crude for delivery in February, sank $1.20 to $79.59 per barrel, after plumbing a low of 78.37.
Brent North Sea crude for February dived $1.12 to $78.18 in late afternoon London trading, having earlier touched $77.04.
New York crude had briefly surged on Monday to a 15-month high near 84 dollars on the back of robust Chinese economic data.
However, the US government’s Department of Energy (DoE) announced Wednesday that crude oil reserves surged by 3.7 million barrels in the week ending Jan 8.
That was far more than expectations for a gain of 1.0 million barrels, according to analysts polled by Dow Jones Newswires.
The DoE added that distillates — including heating fuel and diesel — rose by 1.4 million barrels, confounding forecasts of a 1.8-million-barrel drop. Distillates are under the market’s focus amid an ongoing cold snap in the United States.
Oil prices had slumped Tuesday on prospects of easing heating fuel demand in the United States due to milder weather and new moves by China to cool off its economy.
The news stoked the oil markets because China is the world’s second biggest crude consumer after the United States.
Currencies
The euro wilted in late-day trading Wednesday, giving back gains against the dollar as investors sold off the single currency ahead of an interest rate decision Thursday by the European Central Bank.
The euro was trading at $1.4481 against $1.4484 late Tuesday in New York after having at one point risen to 1.4579 dollars, its best showing since Dec 16.
In London on Wednesday, the euro was changing hands at $1.4481 against $1.4484 late on Tuesday, at 132.46 yen (131.80), £0.8896 (0.8961) and 1.4774 Swiss francs (1.4753).
The dollar stood at 91.47 yen (91.01) and 1.0204 Swiss francs (1.0185).
The pound was at $1.6274 (1.6158).
Gold
On the London Bullion Market, the price of gold fell to $1,127.25 an ounce at the fixing from $1,153 on Tuesday.