World stocks mixed as European summit approaches

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By PAMELA SAMPSON, Associated Press

BANGKOK (AP) — World stock markets traded sluggishly Tuesday as more bad news about Spain's banks rattled investors ahead of a European summit on the region's debt crisis and economic malaise.

Investors already worried about an economic slowdown in the U.S. and China were preparing for Europe's leaders to disappoint at their June 28-29 gathering in Brussels.

In early European trading, Britain's FTSE 100 was nearly unchanged at 5,451.20 and Germany's DAX was marginally down at 6,130.91. France's CAC-40 lost 0.2 percent to 3,016.34.

Wall Street appeared headed for a slightly higher open. Dow Jones industrial futures rose 0.1 percent to 12,444 and S&P 500 futures inched up slightly to 1,307.50.

Asian stock markets were pulled lower by lack of investor confidence. Japan's Nikkei 225 index fell 0.8 percent to close at 8,663.99 and South Korea's Kospi was 0.4 percent lower at 1,817.81. Australia's S&P/ASX 200 lost 0.4 percent to 4,013.30. But Hong Kong's Hang Seng rose 0.5 percent to 18,981.84. Benchmarks in Singapore, Taiwan and mainland China fell.

Among the most pressing issues at the EU summit will be how to ease some of Greece's austerity terms now that it has elected a government in favor of its international bailout. Officials in both Athens and Brussels say the current deficit reduction targets are unrealistic. But giving Greece more time to make budget cuts could mean giving it more money to finance its debt. Several European countries are reluctant to do that.

Anxiety over Spain escalated Monday, when Moody's Investors Service said it was downgrading 28 Spanish banks, including international heavyweights Banco Santander and Banco Bilbao Vizcaya Argentaria. The same day, the country formally asked other euro countries for rescue loans for its banks, which are reeling from the collapse of the country's real estate sector. The amount and terms will be agreed on July 9. Two international audits have estimated that Spain's banks could need up to €62 billion ($77.7 billion).The same day,

Meanwhile, credit ratings agency Fitch on Monday downgraded Cyprus to "junk" status, prompted by the amount of rescue money that would be needed to bail out its banks which are heavily exposed to the troubled Greek economy. The country's benchmark stock index slumped 7.2 percent to 145.76 points on the downgrade.

The unanswered questions surrounding Spain and Greece made for a high-risk environment that left little appetite for aggressive investing in stocks, analysts said.

"The volumes are low, I think, because the market generally trades rationally and institutional and longer-term investors won't go into the market at the moment because the clarity or visibility three to six months from now is very low," said Benjamin Collett, head of Japanese equities at Louis Capital Markets in Hong Kong.

Japanese exporters, which are vulnerable to economic turbulence in Europe, slumped. Yamaha Motor Co. shed 2.3 percent and Sharp. Corp. fell 2.9 percent. Sony Corp. lost 2.9 percent.

Steelmakers across Asia also fell. South Korea's POSCO shed 1.8 percent and Japan's Nippon Steel Corp. dropped 1.7 percent.

Benchmark crude was down 26 cents to $78.97 in electronic trading on the New York Mercantile Exchange. The contract fell 55 cents to close at $79.21 in New York on Monday.

In currencies, the euro rose to $1.2487 from $1.2495 late Monday in New York. The dollar fell to 79.27 yen from 79.68 yen.

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