European markets trim gains, Wall Street slips after worse than expected trade data

European markets trim gains, Wall Street slips

LONDON — European stock markets trimmed earlier gains Wednesday and Wall Street slipped 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 closed up 0.7 percent at 4,436.75 with heavyweight mining and oil companies leading the march higher amid higher commodity prices.

Germany’s DAX rose 1.1 percent to 5,051.18 with sportswear group Adidas AG up over 7 percent following a recommendation upgrade from analysts at HSBC. France’s CAC-40 was up 0.6 percent at 3,315.27.

Europe’s main markets had been up around 2 percent earlier in the day but a subdued opening on Wall Street prompted some investors to book profits.

Meanwhile, the Dow Jones industrial average was down 0.2 percent at 8,749.23 and the Standard & Poor’s 500 fell 0.3 percent to 939.53 in midday trade in New York.

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.

In Europe, shares in Fiat rose 4.9 percent after the Italian automaker closed a deal that gives it most of Chrysler’s assets and saves the troubled U.S. automaker from liquidation. A new company will be placed in the hands of Fiat’s CEO Sergio Marchionne.

Elsewhere, a sharp increase in car production helped Britain’s industrial sector to grow in April. The country’s industrial production rose by 0.3 percent between March and April, official figures showed.

“This came as something of a surprise to analysts — being the first rise seen since February 2008,” said Anthony Grech, market strategist at IG Index. “Hopefully this will provide more concrete evidence that a corner has been turned.”

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.

Benchmark crude for July delivery was up $1.12 at $71.13 in European electronic trading on the New York Mercantile Exchange. 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.

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AP business writers Pan Pylas in London and Jeremiah Marquez in Hong Kong contributed to this report.