RTTNews - The China stock market has finished lower in consecutive trading days, giving back nearly 70 points or 2.5 percent in the process. The Shanghai Composite Index fell back below support at the 2,750-point plateau, and now investors are bracing for even more downside pressure at the opening of trade on Monday.
The global forecast for the Asian markets offers little in the way of guidance. Some modestly positive economic news out of the United States is likely to be offset by geopolitical tensions regarding North Korea's stated intention to conduct further nuclear tests. The violence and protests surrounding the Iranian election between President Mahmoud Ahmadinejad and challenger Mirhossein Mousavi add to the uncertain sentiment. The European markets were mostly lower on Friday and the U.S. bourses ended nearly unchanged, and the Asian markets are expected to fall in between with mild losses.
The SCI finished sharply lower on Friday, thanks to heavy selling pressure among the financial and steel stocks. Medical stocks outperformed however, thanks to the continuing spread of the swine flu virus.
For the day, the index retreated 53.56 points or 1.91 percent to close at 2,743.76 after trading between 2,722.22 and 2,812.68. The Shenzhen Index lost 175.78 points or 1.64 percent to finish at 10,524.13 for a combined turnover of 191.24 billion yuan. Losers outnumbered gainers by 673 to 138 in Shanghai and 585 to 108 in Shenzhen.
Among the decliners, Tangshan Iron and Steel shed 5.39 percent, while Wuhan Iron and Steel dropped 5.21 percent, Shanghai Pudong Development Bank fell 2.9 percent, China Merchants Bank dropped 2.7 percent and Baoshan Iron & Steel dropped 3.2 percent. Bucking the trend, Guilin Layn Natural Ingredients rose by the daily limit of 10 percent and Hualan Biological Engineering added 7.64 percent.
The lead from Wall Street is virtually flat as stocks finished on a mixed note on Friday following a muted reaction to some encouraging news this morning. The week's trading was slowed by below average volume, which prompted limited movement in the equity markets. Some investors have moved to the sidelines ahead of the usual calm of the summer season.
Earlier, trading on the New York Stock Exchange was disrupted by a breakdown in three servers, halting trading in 240 stocks. Several companies were forced to stop trading for a limited period, including Bank of America (BAC), General Electric (GE), Exxon Mobil (XOM) and Merck (MRK).
On the economic front, consumer sentiment continued to improve in the month of June, according to a report released by Reuters and the University of Michigan, although the reading rose by less than expected. The report showed that the preliminary reading of the consumer sentiment index for June came in at 69.0 compared to a reading of 68.7 in May. Economists had been expecting a somewhat more notable increase to a reading of 69.5.
Separately, a report from the Labor Department showed that import prices climbed by 1.3 percent in May, compared to a 1.1 percent increase in April. Export prices also rose, climbing by 0.6 percent in May following an increase of 0.4 percent in the previous month. Compared to the same month a year ago, import prices fell 17.6 percent, while export prices slipped by 6.5 percent.
In other news, White House National Economic Council Director Larry Summers stated that the goal of the Obama administration is to end its involvement in private industry as soon as possible. Speaking at the Council on Foreign Relations in New York, Summers said that the interventions were necessary and called for a new approach to too big to fail.
The major averages eventually ended the session on opposite sides of the unchanged line. While the NASDAQ closed down 3.57 points or 0.2 percent at 1,858.80, the Dow closed up 28.34 points or 0.3 percent at 8,799.26 and the S&P 500 closed up 1.32 points or 0.1 percent at 946.21. Despite the mixed performance for the session, the major averages all posted modest weekly gains. The Dow rose 0.4 percent for the week, while the NASDAQ and the S&P 500 posted weekly gains of 0.5 percent and 0.7 percent, respectively.
In economic news, industrial production in China was up 8.9 percent on year in May, the National Bureau of Statistics said on Friday, beating forecasts for a 7.8 percent increase following the 7.3 percent annual expansion in April. For the period of January to May, industrial output gained 6.3 percent on year. It had risen 5.5 percent through the first four months of the year.
The NBS also said that retail sales climbed 15.2 percent in May, beating forecasts for a 15 percent increase. Through the first five months of the year, retail sales are up 15 percent - the same as through the first four months of the year.
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