Stocks enjoy late rally at end of troubled week

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By PAN PYLAS, Associated Press

LONDON (AP) — Stock markets recouped some ground late Friday but fears of an intensifying global economic slowdown meant most are ending the week sharply down.

The primary source of concern this week has been China, with a run of economic indicators suggesting that the world's second-largest economy is not performing as strongly as hoped. That's important for the global economy as China has helped cushion the blow from the fallout of the financial crisis over the past few years.

Europe has also been a source of concern, with figures over the week suggesting that the anticipated recession in the 17-country eurozone may not be as mild as most forecasters have predicted. Those concerns have had a knock-on impact on the borrowing costs for both Spain and Italy. The yields of both countries ten-year bonds have consolidated above 5 percent once again.

One bright spot has been the U.S. economy, which has consistently outperformed market expectations over the past few months. However, even here a survey of new home sales, released Friday, failed to meet expectations by fall for the second month running.

The Commerce Department said new home sales dropped 1.6 percent last month to a seasonally adjusted annual rate of 313,000 homes. Sales have fallen nearly 7 percent since December.

Nevertheless, toward the end of the European session, investors picked up some beaten-down stocks, helping shore up markets.

In Europe, the FTSE 100 index of leading British shares closed up 0.2 percent at 5,854.89 while Germany's DAX rose the same rate to 6,995.62. The CAC-40 in France ended 0.1 percent higher at 3,476.18.

In the U.S., the Dow Jones industrial average was up 0.2 percent at 13,074 while the broader S&P 500 index rose the same rate to 1,395.

Next week could well be crucial in determining whether this week marked the end of the rally that's seen the world's main stock markets race up to multi-month highs. In the U.S., the recovery has been even more marked, with the main indexes trading at near-four year highs.

"The question mark now is whether markets have further to fall, having still climbed significantly in 2012," said David Jones, chief market strategist at IG Index. "For example the S&P 500 is down around 1 percent for the week, having risen 10.3 percent for the year so far, and 26 percent from its October low."

In the currency markets, the euro recovered alongside stocks, and was trading 0.5 percent higher at $1.3261.

Earlier in Asia, Japan's Nikkei 225 index dropped 1.1 percent to close at 10,011.47 as the country's formidable export sector faded amid fears of slowing overseas demand. The dollar rose to 82.70 yen from 82.59 yen late Thursday in New York.

Elsewhere, Hong Kong's Hang Seng lost 1.1 percent to 20,668.80 while South Korea's Kospi edged up marginally to 2,026.83.

Australia's S&P/ASX 200 fell nearly 0.1 percent to 4,270.40 as the country's mining and resource shares took a pounding over worries of reduced demand from China, the world's biggest consumer of raw materials.

Oil prices continued to rise, with the benchmark crude contract for May delivery up $1.81 at $107.16 per barrel in electronic trading on the New York Mercantile Exchange. The contract fell $1.92 to finish at $105.35 per barrel on the Nymex on Thursday.

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Carlo Piovano in London and Pamela Sampson in Bangkok contributed to this report.

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