World stock markets fell Thursday after a weak Spanish bond auction inflamed concerns about the European debt crisis and hopes faded for more help for the US economy from the Federal Reserve.
Benchmark oil rose above $102 per barrel while the dollar rose against the euro but ebbed against the yen. The debt crisis in Europe flared anew after a disappointing auction Wednesday of government debt in Spain signaled investor confidence in the country's finances is weakening. That compounded worries that arose Tuesday, when minutes released from the March meeting of the US Federal Reserve's Open Market Committee gave no hint of a third round of bond purchases, dubbed quantitative easing III or QE3, to support the US economy.
The Fed has already carried out two rounds of bond-buying, most recently in August 2010, to drive down long-term interest rates. Low bond yields generally encourage investors to shift money to buying stocks. "The recurring fear is that Fed quantitative easing through asset purchases is off the table for now. Basically the Fed pulled the rug from under investors' feet and seems there is a lot of profit-taking now," said Stan Shamu, market analyst with IG Markets in Melbourne. European stock markets fell in early trading, extending losses in Asia. Britain's FTSE 100 was less than 0.1 percent down at 5,699.41. Germany's DAX was also marginally down at 6,780.68. France's CAC-40 fell 0.2 percent to 3,307.47.
Wall Street was headed to a lower opening, with Dow Jones futures down 0.2 percent and S&P 500 futures losing 0.2 percent to 1,390.50. Japan's Nikkei 225 index slipped 0.5 percent to close at 9,767.61, after hitting its lowest intraday point since March 8 at 9,692.70. Hong Kong's Hang Seng tumbled 1 percent to 20,593 while falling commodity prices dragged Australia's S&P/ASX 200 down 0.3 percent to 4,319.80. But South Korea's Kospi reversed course after a negative open, rising 0.5 percent to 2,028.77, and mainland Chinese shares jumped after a three-day holiday.
The Shanghai Composite Index gained 1.7 percent to 2,302.24 and the smaller Shenzhen Composite Index soared 3.1 percent to 919.42. Sentiment was further hurt by the release of a Chinese services sector index by HSBC that showed a slight slowdown in service sector growth, even though the official reading Tuesday pointed to acceleration, said Dariusz Kowalczyk, senior economist for Credit Agricole CIB in Hong Kong. For the month of March, the HSBC index fell by 0.6 point to 53.3 points. A reading above 50 indicates expansion.
Plunging metals prices sent mining and materials shares lower. In Australia, global mining giants Rio Tinto Ltd. lost 1.7 percent and BHP Billiton was 0.9 percent down. Bank stocks, which typically decline when the European debt crisis flares, dropped sharply. Hong Kong-listed Industrial & Commercial Bank of China, the world's biggest bank by market value, fell 1.6 percent. Japan's Mitsubishi UFJ Financial Group fell 1.2 percent. Benchmark oil for May delivery was up 78 cents to $102.25 per barrel in electronic trading on the New York Mercantile Exchange. The contract fell $2.54 to finish at $101.47 a barrel in New York on Wednesday. It had not closed below $102 per barrel since Feb. 15.