European markets trim gains on soft US opening

LONDON — European stock markets trimmed earlier gains Wednesday, while Wall Street failed to open as strongly as expected, after U.S. government data showed the country’s exports fell to a near three-year low in April.

The FTSE 100 index of leading British shares was up 48.97 points, or 1.1 percent, at 4,453.76 with heavyweight mining and oil companies leading the march higher amid higher commodity prices.

Germany’s DAX rose 75.34 points, or 1.5 percent, to 5,073.20 with sportswear group Adidas AG up over 7 percent following a recommendation upgrade from analysts at HSBC. France’s CAC-40 was up 46.45 points, or 1.4 percent, to 3,343.18.

Europe’s main markets had been even higher earlier in the day but a subdued opening on Wall Street prompted some investors to book profits.

The Dow Jones industrial average was up only 10.43 points, or 0.1 percent, at 8,773.49 soon after the open while the broader Standard & Poor’s 500 fell 1.1 points, or 0.1 percent, to 941.33.

Futures markets had been predicting a far stronger opening but U.S. trade data dampened hopes that the U.S. economy would start to grow in the second half of the year.

The Commerce Department reported that the U.S. trade deficit edged up 2.2 percent in April to $29.2 billion as crude oil prices hit the highest level since December and exports dropped to their lowest level in nearly three years.

“The consensus forecast for a second half recovery depends a lot on a boost from trade but the data is not validating this call,” said Steven Ricchiuto, chief economist at Mizuho Securities.

Stock markets have rallied over the last three months, and as equities usually start rising 6 to 9 months before actual recovery emerges in the official economic data, this suggests investors believe the massive sell-off in markets during the most acute phase of the financial crisis was overdone. Some of the world’s major equity indexes are now in positive territory for 2009.

Despite the improvement in recent economic indicators, concerns linger about the global economy. With interest rates on government bonds edging higher, unemployment continuing to rise and oil prices at 2009 highs, investors are concerned about the sustainability of a potential recovery. As a result, there are worries in the market that if economic data around the world starts to disappoint expectations, then investors may have to reconsider their optimism.

And though the financial system may have been saved from collapse, investors still want more evidence that banks have started lending again to businesses and households. So far, there’s very little to show that banks are doing anything other than improving their balance sheets.

“Equities are likely to bounce around for the next three months responding to good and bad news on a daily basis before a strong rally in the last quarter,” said David Buik, markets analyst at BGC Partners.

Earlier, world stocks had been buoyed by the rise in commodity prices — which boosted the share price of producers — as well as by Tuesday’s confirmation from the U.S. Treasury Department that ten of the country’s biggest banks will repay nearly $70 billion of bailout money.

Particularly striking has been the rise in oil prices above $71 a barrel — a 2009 high — as investors poured money into crude as a hedge against a weakening U.S. dollar and inflation.

Oil has jumped more than 100 percent in three months, alongside the rally in stock markets, as traders have cheered news showing the worst of a severe U.S. recession is likely over. At the same time, they have brushed off data — such as a 9.4 percent U.S. unemployment rate in May — that suggest crude demand will remain weak. Even growing inventories have not checked crude’s rise.

Benchmark crude for July delivery was up 77 cents at $70.78 in European electronic trading on the New York Mercantile Exchange, having traded above $71. On Tuesday, it jumped $1.92 to close at $70.01.

Earlier in Asia, Hong Kong’s Hang Seng surged 727.17, or 4 percent, to 18,785.66, while Japan’s Nikkei 225 stock average gained 204.67 points, or 2.1 percent, to 9,991.49.

In South Korea, the Kospi advanced 3.1 percent to 1,414.88, Australia’s benchmark climbed about 2.3 percent, while Shanghai’s main index rose 1 percent.

The dollar rose to 98.21 yen from 97.46 yen while the euro climbed to $1.4022 from $1.4053 late Tuesday in New York.

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AP Business Writer Jeremiah Marquez in Hong Kong contributed to this report.