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Global markets shrug off US falls European stocks show modest falls
(about 6 hours later)
Asian and European shares were mixed in Monday trading, as investors appeared to have shrugged off the recent sharp falls on Wall Street. European stock markets were trading lower in early Monday afternoon trade, as investors remained cautious following last week's sharp falls.
While London's FTSE 100 lost 18 points to 6,196 in early exchanges, Germany's Dax was barely changed at 7,468. Amid fears over the US housing dip, and concern that higher global interest rates mean a credit squeeze, London's FTSE 100 was down 23 points at 6,192.
Earlier, Japan's Nikkei 225 index had closed up 5.5 points at 17,289 and Hong Kong's Hang Seng added 88 points to finish at 22,658. Ahead of the start of trading in the US, Frankfurt's Dax was down 35 points at 7,416.
A major factor in US share declines has been the ongoing housing market slump. Earlier on Monday, the main Far East share indexes had closed up.
'World economy growing' Japan's Nikkei 225 index had finished up 5.5 points at 17,289, while Hong Kong's Hang Seng added 88 points to end at 22,658.
"Traders will certainly still be watching what happens on Wall Street this week," said David Cohen, director of Asian forecasting at Action Economics in Singapore. US mortgage woes
"But the sense is that as long as it doesn't trigger a more serious economic slowdown in the US, the world economy should be able to keep growing."
Wall Street's Dow Jones Industrial Average fell 1.5% on Friday, bringing its fall for the week to 4.2%, the largest weekly percentage drop since March 2003.Wall Street's Dow Jones Industrial Average fell 1.5% on Friday, bringing its fall for the week to 4.2%, the largest weekly percentage drop since March 2003.
Along with the problems in the US housing market, another concern for investors is the worry about a possible credit crunch on the back of higher interest rates. Along with falling prices, the US housing market has been hit by crisis in the so-called sub-prime mortgage market.
This sector, which offers high interest loans to higher risk customers or people on low incomes, has seen record numbers of defaults in the past year, putting severe financial pressure on a number of companies in the industry.
The separate fear over a credit squeeze has been caused by central banks raising interest rates to combat inflation.
Higher interest rates make it harder for firms, such a private equity groups, to continue to finance the ongoing takeover boom, leading to fears of a sharp downturn.
The Bank of England and the European Central Bank are both due to unveil their latest interest rate decisions on Thursday, but analysts expect both to keep rates unchanged.