Global stocks mixed as investors digest gains

Global stock markets were mixed yesterday, with investors torn between pushing the recent advance after strong US and German data or consolidating gains on fears profit-taking will spark a sharp reverse.

Dealers warned that the sharp bounce of the past two weeks may prove purely technical because, after share prices hit multi-year lows amid concerns about how the recession could go, a pick up was always to be expected.

If the underlying economy remains weak, however, then the gains would be vulnerable, with investors at risk of getting burned yet again.

On the day, the data was surprisingly positive.

US home construction starts and permits jumped in February from 50-year lows - a sign perhaps the property market is stabilising - while Germany's ZEW institute investor confidence index improved to its best level since July 2007.

The US report "is helping reinstate the relative optimism that vanished in late-day action (on Monday) to snap the four-day winning streak on Wall Street," Charles Schwab & Co analysts said.

"According to financial market experts, the economic slowdown is gradually phasing out. The bottom of the recession is likely to be reached this summer," ZEW president Wolfgang Franz said in a statement.

"The economic situation is extremely bad but there are the first signs of hope. They should not be played down," Mr Franz said.

The markets overall were mixed.

On Wall Street, the Dow Jones Industrial Average was up 1.08 per cent at around 1700 GMT, having earlier moved in a narrow range.

Dealers there said that not too much should be read into the rebound, with the housing market still falling although it was now perhaps nearer to the bottom.

They said investors were cautious ahead of the US Federal Reserve's two-day policy meeting, waiting to see what further action it might take to stimulate the economy after having cut interest rates to virtually zero.

Fred Dickson, market strategist at DA Davidson & Co, said investors were anxious to hear the Fed's update on the state of the economy.

"We expect the Fed to provide language suggesting the current recession is deepening and unemployment is worsening," he said.

"Investors will also be looking to see if the Fed has decided to expand its purchase of mortgage securities and other assets as the housing market and the economy continues to deteriorate."

In Europe, the markets closed mostly lower, failing to find enough support from Wall Street's early gains.

London's FTSE 100 index of leading shares was down 0.18 per cent to 3,857.10 points. In Paris, the CAC 40 fell 0.87 per cent to 2,767.28 points and in Frankfurt the DAX lost 1.40 per cent to 3,987.77 points.

"The European markets fell as investors looked to take some profits," said Joshua Raymond, analyst at City Index. "What we now need to see is a small degree of consolidation and investors taking a pause for breath."

In Paris, Frederic Rozier of Meeschaert Gestion Privee said there was some profit taking as the market consolidated but the US data was positive at least in that it pointed to an improvement.

Yesterday's losses were part of a normal consolidation and necessary for any further gains, he said, adding that an overall advance needs to have the banks along as well to be sustained.

Earlier in Asia, Tokyo jumped 3.18 per cent to a five-week high on hopes that massive government stimulus efforts will begin to pay off soon.

Japan's benchmark Nikkei-225 index has added more than 10 per cent in just three days but analysts said they were unsure whether the rally marks a turning point for the battered market which struck a 26-year low early last week.

"It's unlikely that Tokyo shares will rise further from current levels on domestic cues alone," Takeo Kusajima, senior fund manager at Chuo Mitsui Asset Management, told Dow Jones Newswires.

Elsewhere in Asia, Hong Kong lost 0.8 per cent but Chinese shares gained 3.02 per cent and Sydney gained 3.1 per cent, with strong commodity prices helping push the market to a four-week high.