Markets drift as investors digest economic outlook

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By PAN PYLAS, Associated Press

LONDON (AP) — Markets were subdued Monday following a week when some of the optimism that has dominated trading this year was punctured by renewed concerns over Europe's debt crisis and a raft of downbeat economic indicators, particularly out of China.

Though the recovery in the U.S. shows signs of gaining traction, investors are getting increasingly fidgety about the scale of the slowdown in China, the world's second largest economy. China's fortunes are important for the global economy as its sky-high growth levels over the past few years have helped cushion the blow from the financial crisis.

And with investors fretting over Europe's debt crisis once again, stocks around the world have lost their shine following a buoyant start to the year, which saw many markets trading at multimonth highs. The most recent bout of worries have centered on Spain, the eurozone's fourth-largest economy, after the government warned that its budget deficit this year would be higher than previously projected.

Much of the attention this week could center on Friday's meeting of eurozone finance ministers. There's growing speculation that Germany is willing to countenance an increase in Europe's bailout fund, the European Stability Mechanism.

"The fact that there is pressure to increase the size of the funds reeks of persistent fears over the damage that can still be done by contagion," said Jane Foley, an analyst at Rabobank International.

In Europe, the FTSE 100 index of leading British shares was up 0.1 percent at 5,862 while Germany's DAX fell 0.1 percent to 6,986. The CAC-40 in France was 0.3 percent lower at 3,467.

The euro was bearing the brunt of concerns over Europe's ongoing debt problems, trading 0.5 percent lower at $1.3205.

Wall Street was poised for a fairly subdued opening — both Dow futures and the broader S&P 500 futures were 0.1 percent lower.

Earlier in Asia, Japan's Nikkei 225 index rose less than 0.1 percent to end at 10,018.24 as the yen slipped against the dollar, helping the country's powerhouse export sector. Hong Kong's Hang Seng Index finished unchanged at 20,668.86.

Mainland Chinese shares were flat too — the benchmark Shanghai Composite Index was less then 0.1 percent higher at 2,350.60 while the smaller Shenzhen Composite Index was unchanged at 952.76.

Investors around the world are also keeping a close watch on developments in oil markets, for fear that rising oil prices could derail the global economic recovery. The benchmark New York rate was down 55 cents at $106.32 a barrel. Despite the decline, oil prices remain fairly close to nine-month highs.

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Kelvin Chan in Hong Kong contributed to this report.

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